Goldman Sachs and JP Morgan post strong quarterly earnings

Strong investment banking fees helped boost both Goldman Sachs and JP Morgan in the first quarter

A view of the Goldman Sachs stall on the floor of the New York Stock Exchange.  Photograph: REUTERS/Brendan McDermid/File Photo

A view of the Goldman Sachs stall on the floor of the New York Stock Exchange. Photograph: REUTERS/Brendan McDermid/File Photo

 

Three of the largest banks in the United States produced strong quarterly results on Wednesday.

Goldman Sachs cashed in on another roaring period for its traders and investment bankers, with revenue and earnings rising to a record in a quarter marked by the Reddit-fueled stock-market mania.

The bank’s traders delivered their strongest performance in more than a decade, with a 47 per cent surge in revenue, led by a jump in equities. Goldman’s dealmakers joined the party, with a 73 per cent rise in investment-banking fees. That bonanza was anchored by revenue from equity underwriting, which quadrupled amid a red-hot market for special purpose acquisition companies and tech-company stock offerings.

In the year since the deadly pandemic first disrupted the global economy, Goldman Sachs has benefited from the resulting increase in market volatility and companies tapping wide-open capital markets.

Goldman’s stock had climbed 24 per cent this year through Tuesday, reaching an all-time high of $348.81 (€291 million) last month. The shares rose 3 per cent in early trading after quarterly revenue came in at $17.7 billion and earnings rose to $6.84 billion.

The bank also set aside more than $6 billion for compensation and benefits, an 87 per cent surge.The firm’s trading group clocked its best performance since 2010, with net revenue of $7.58 billion, led by the $3.69 billion from equities traders, a 68 per cent rise.

JPMorgan Chase’s dealmakers helped usher in the firm’s best quarter on record, but shares fell as the bank warned that loan demand remains tepid.

Investment-banking fees soared 57 per cent, beating analysts’ estimates and boosting net income to $14.3 billion, the most JPMorgan has ever earned in a single quarter. A larger-than-expected reserve release added to the windfall as the bank determined it didn’t need as much stocked away for future loan losses.

Government stimulus programmes and potentially massive infrastructure spending mean “the economy has the potential to have extremely robust, multiyear growth,” chief executive Jamie Dimon said in a statement. But, he said, loan demand was still “challenged”.

Dimon said last week in his annual letter to shareholders that he’s optimistic the pandemic will end with a US economic rebound that could last at least two years. He pointed to an “extraordinary” amount of spending power from both consumers and corporations as the country opens back up.

Still, investors are keen for signs that banks will soon expand their loan portfolios. Across the industry, credit-card balances have been dwindling and deposits soaring as a result of trillions of dollars of stimulus.

Investment-banking fees jumped to $2.99 billion, topping the $2.59 billion analysts were expecting. The bank posted a $5.2 billion reserve release, a metric Dimon said is not considered “core or recurring profits.”

Equity underwriting more than tripled to $1.06 billion, beating expectations as JPMorgan rode the wave in activity driven in part by a slew of special purpose acquisition companies that went public in the first quarter.

Wells Fargo, meanwhile, posted profit that topped analyst estimates though the lender still struggled to rein in expenses in another reminder of its long road to getting costs under control.

The firm reported net income of $4.7 billion boosted by a larger-than-expected release of loan-loss reserves. The bank’s non-interest expenses were $14 billion, a touch higher than analysts forecast while net interest income was lower than expected.

“Our results for the quarter, which included a $1.6 billion pre-tax reduction in the allowance for credit losses, reflected an improving US economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities,” chief executive Charlie Scharf said.

- Bloomberg