Banks. It’s good to be one.
Quarterly results from a handful of majors on Wednesday showed it still pays to be in the money business.
JPMorgan’s traders scored their best fourth quarter ever, for example, and it was gangbusters over at Goldman too. David Solomon’s guys (and gals) hauled in $6.2 billion in revenue across FICC and equities trading (the latter had a record year), easily better than the $5.44 billion consensus expected.
Goldman put up a decent showing in IB as well. Revenue there was $2.06 billion, slightly ahead of estimates. Advisory fees undershot, but secondaries and IPOs drove a big beat in equity underwriting ($500 million versus $426 million seen) and debt underwriting was strong too thanks to a pickup in leveraged finance deals.
As the figure shows, total revenue across Global Banking & Markets (i.e., Goldman’s bread and butter, where the firm belatedly refocused once Solomon was sufficiently disabused of his consumer pipe dream) was $8.5 billion in Q4, up 33% YoY and almost a billion ahead of consensus.
Goldman also said Asset and Wealth Management fees rose 10% to $10.4 billion for the full-year. Those are “durable revenues,” to use the bank’s description. That, as opposed to the cyclical nature of IB and inherently mercurial trading revenue.
Overall Q4 revenue at Goldman was $13.87 billion, a billion and a half ahead of consensus. EPS of $11.95 was a massive beat. Solomon said the bank’s seen a “meaningful pickup” in large-cap M&A, and Denis Coleman reiterated that Goldman’s wealth business has “room to improve penetration” (please, God, hold the jokes).
At Citi, Jane Fraser beat, raised and, even better, said the bank will buy back $20 billion of shares over the next few years. She also said Citi won’t meet a profitability milestone, or at least not on schedule, but who cares about that when you’re buying back stock? The shares jumped sharply.
The bank index was on track for its best session since the day after Americans reelected Donald Trump, whose de-regulation promises are viewed favorably (to put it mildly) by the banking lobby.
The irony of Trump, people’s champion, defender of Joe Everyman, nakedly pandering to Wall Street and surrounding himself with various sorts of centimillionaires and centibillionaires is lost on the MAGA faithful.
Of course, it doesn’t matter: Big banks are going to make a lot of money regardless of who’s president. In fact, as Bloomberg noted Wednesday, the only better year for Wall Street — proxied by the combined net income of JPMorgan, Wells, Citi and Goldman — than 2024 was 2021, Joe Biden’s first year in office.
Again: It pays to be in the money business.
“Room to improve penetration” – when you’re a bank, they just let you do it.
Finally, someone is looking out for those poor, starving bankers. The MAGA faithful can sleep tight knowing the bankers and tech titans will be able to fill up their money bins to the tippy top and Trump’s cabinet will protect them from the big, bad DEI officers.
Having a bank franchise is a license to make money. The gang that couldn’t shoot straight at SVB should have read the chapter on asset liability management. Repeat after me, do not invest in long dated fixed rate assets if funded by short dated hot funds. If they had they would still be tonning it.
Bankers may complain about regulatory oversight (most regulations actually get enacted because of abuses by those same bankers) but that also impedes competitive entry along with hefty capital requirements.
A week or so ago, a “private” banker at my local Chase outlet contacted me to flag the fact I had a large balance in a checking account at the bank. Is that a bad thing? I asked. Well, it’s attached to a debit card, which might be lost or hacked (not reassuring). But you have measures in place — withdrawal caps, fraud alerts — to protect me, right? Well, yes, but…, he replied. What would you have me do, I said. Well, you could move it to a savings account, he said. And what’s the rate on that? I asked. 0.01 percent, he said. Really? And the fed funds rate is around 4.5 percent and you’re charging $39 for late payment on credit cards? I said. Yes, but…, he said. I’ll think about it, I said. Thanks for reaching out.
Banksters, can’t live with ’em, can’t live without ’em.
H-Man, the MAGA faithfull fail to grasp that Trump with the Mar Lago gig and all of its trimmings are not the trappings of the commoner. These are very rich people doing what very rich people do.