JPMorgan earnings leave Goldman Sachs in the shade

Trading only bright spot in Goldman’s four core areas as WeWork and Uber take toll

Goldman Sachs’ shares are up more than 23 per cent so far this year, but it still trades at below the book value of its assets.

Goldman Sachs’ shares are up more than 23 per cent so far this year, but it still trades at below the book value of its assets.

 

Record investment banking fees helped JPMorgan Chase retain its Wall Street crown on Tuesday, while rival Goldman Sachs was knocked by a 27 per cent drop in profits following losses on tech investments such as WeWork and Uber.

JPMorgan, the US’s biggest bank, and trading powerhouse Goldman bookended a bumper earnings day for US banks that also included lacklustre third-quarter results from Citigroup and Wells Fargo.

JPMorgan was the standout performer of the four big banks, with net income rising 8 per cent to $9.1 billion. Revenues were up 8 per cent to $29.3 billion in the three months to end September. Both numbers beat analyst expectations, and JPMorgan was rewarded with a 4 per cent rise in its share price by lunchtime in New York.

“JPMorgan is best in class of global banks and it shows this quarter,” said Wells Fargo analyst Mike Mayo. The results included the best third quarter ever for JPMorgan’s investment banking division, which handled the catastrophic attempt to float WeWork, and several other listings that plunged in value after they begun trading.

Other parts of the bank also performed strongly, including a 25 per cent increase in revenues from fixed income trading revenues against a year ago, and a 10 per cent rise in credit card sales volumes.

Where were the losses?

Mr Dimon struck a note of caution for the future, warning that US economic growth had “slowed slightly”.

At Goldman, where investors eagerly await a strategic plan in January, third-quarter net income of $1.8 billion was dragged lower by $80 million of losses on the bank’s proprietary stake in WeWork and $267 million of provisions against stakes it holds in publicly listed companies, such as Uber, Tradeweb and Avantor.

Goldman’s investment banking fees were down 15 per cent year on year to $1.69 billion, in contrast to JPMorgan’s 8 per cent rise, and Citigroup’s 4 per cent rise. Markets revenues were a bright spot for Goldman, rising 6 per cent year on year to $3.29 billion. Goldman’s shares fell as much as 3.3 per cent in early trading, before rebounding to trade flat in a session during which the Dow Jones US banks index was up nearly 3 per cent. – Copyright The Financial Times Limited 2019