Profits at Wall Street banks jump on the strength of the business, creating a recovery
NEW YORK (Reuters) – Profits at some of the biggest U.S. lenders rose in the fourth quarter, sparking a rally in bank stocks on Wednesday as trading surged in strong equity markets.
Market conditions were favorable for banks. Equity markets rallied, with the S&P 500 up 23.3% in 2024, deal volumes increased and strong demand for bond papers pushed up investment-banking fees.
Among banks that reported earnings on Wednesday, shares rose 5.9 percent for Goldman Sachs and 0.9 percent for JPMorgan Chase. Bank of America and Morgan Stanley will report results on Thursday.
“The animal spirits are back,” said Stephen Biggar, banking analyst at Argus Research, referring to the tendency of investor sentiment to drive share prices. “There are good times to be overexposed to capital market returns, and this is one of them.”
Goldman Sachs posted its biggest quarterly profit since the third quarter of 2021 at $4.11 billion. Global banking and markets revenues for the fourth quarter increased 33.4% year-over-year and the bank posted a record annual net income per share.
In a statement, the bank said it was optimistic about investment-banking payments in December, giving it an optimistic outlook for the coming months.
JPMorgan Chase reported a nearly 50% jump in net income last quarter as investment banking fees and trading income jumped, with CEO Jamie Dimon hopeful of better conditions ahead.
The earnings reports came days before Monday’s inauguration of President-elect Donald Trump, who has pushed an austerity agenda. Simpler regulation could bring about significant changes in the business sector, increasing banks’ fee income.
“Businesses are more optimistic about the economy, and are encouraged by expectations for a more growth agenda and improved cooperation between government and business,” Dimon said in a statement.
Investment and banking fees rose 59% to $725 million in the quarter, pushing Wells Fargo’s profit up 47.3% from a year earlier.
Citigroup’s quarterly profit beat estimates, helped by more marketing and deals. Investment-banking revenue grew 35 percent to $925 million.
2025 view
Softer regulations under Trump could help improve banks’ performance. Michael Barr, the Federal Reserve’s top regulator, has announced he will step down this month. His exit clears the way for Trump to appoint an official with an industry-friendly agenda.