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Banks ready to tap new profit well

Benefit from loan-loss reserve releases is vanishing, but don’t panic

It’s nearly last call at the loan-loss-reserve saloon. But investors shouldn’t fret too much when the bell rings.

Banks have topped up their earnings cups for the last 4½ years with releases from loan-loss reserves. These have boosted profits and capital during a period when the bottom lines of many banks were under pressure from extremely low interest rates and slow loan growth.

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