A bumper set of second-quarter earnings on Friday from Citigroup, JPMorgan and Wells Fargo reveals their reliance on Washington. Higher interest rates, partly driven by the Federal Reserve, helped all three big U.S. lenders beat analysts’ estimates. Yet without more help from the nation’s capital, it’s hard to justify the trio’s healthy valuations.

JPMorgan, for example, cranked out $6.5 billion of net income. That equates to an annualized return on equity of 12 percent, allowing the bank run by Jamie Dimon to perform the rare feat of besting rival Wells Fargo, if only by a hair. The New York-based behemoth has to improve on that, however, to make its current price-to-book ratio of 1.4 times look reasonable. That metric implies a 14 percent ROE over the long term.

Meanwhile, stripping out a one-off gain from a legal settlement nixes almost 1 percentage point of JPMorgan’s return on equity. Apply the tax rate from last year’s second quarter, which was almost 6 percentage points higher, and ROE would drop to around 10 percent.

On top of that, credit costs fell. That’s fine, but at some point the bank will have to set aside more to cover potential losses. The same is true of Wells Fargo, where charge-offs represented under 0.3 percent of average loans. Citi’s credit costs are rising, but that’s mainly because it has been aggressively expanding its credit-card business.

Wells also is less efficient than it used to be, with costs taking some 61 cents of each dollar of revenue. That used to hover around 57-58 cents, the range where Citi and JPMorgan are now. Wells Chief Executive Tim Sloan is, as a result, targeting $2 billion of cost cuts by the end of next year. With such distractions and a slight drop in lending, it’s hard to see how the bank’s earnings will match its 1.5 times book multiple any time soon.

Citi may be able to squeeze more profit from its growing cards business. But its annualized return on equity for the quarter was just 6.8 percent, below what’s implied by its trading multiple just shy of 90 percent of book value.

Unless trading and lending, for example, suddenly pick up, the best ways for banks to meet their shareholders’ expectations lie out of their hands. The tax cuts and looser regulation hoped for from President Donald Trump are Exhibits A and B. Given dysfunction in Washington, Dimon and his counterparts can’t rely on that help.

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- Citigroup, JPMorgan and Wells Fargo all reported second-quarter earnings on July 14.

- Citigroup’s net income available to common shareholders was $3.6 billion, 3 percent lower than in the same period last year. Earnings per share of $1.28 beat the consensus estimate of sell-side analysts of $1.21 per share. Revenue rose by 2 percent compared to the same period in 2016, while cost of credit rose by 22 percent, largely due to the acquisition of the Costco credit-card portfolio in 2016.

- JPMorgan’s net income for the period was $6.6 billion. At $1.82 per share, earnings topped the consensus estimate of $1.58 per share. Net income was boosted by a $406 million after-tax gain from a legal settlement. The bank’s tax rate of 27.9 percent was 5.7 percentage points lower than in the same period last year and 5.2 percentage points higher than this year’s first quarter.

- Wells Fargo reported net income applicable to common shareholders of $5.4 billion, up 4 percent from the same period last year. Analysts had forecast 5 cents a share less than the $1.07 a share actually reported. Revenue was flat at $22.2 billion.

- Average deposits were up 5 percent from a year earlier at $1.3 trillion, suggesting little fallout from the fake-accounts scandal that cost former Chief Executive John Stumpf his job. Average loans were down less than 1 percent at $975 billion. Stumpf’s successor, Tim Sloan, said the bank will cut annual expenses by $2 billion by the end of 2018 and increase share buybacks.

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(Additional reporting by Tom Buerkle and Gina Chon. Editing by Richard Beales and Martin Langfield)

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