Monday, January 18, 2021

Wall Street bosses signal strong year-end in financial markets

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The bosses of two of America’s largest banks reported a strong fourth quarter for their trading and investment banking businesses, ending a year in which volatility and central bank interventions paid off largely for Wall Street.

JPMorgan Chase’s trading and investment banking revenues “are up about 20 percent, maybe a little more” so far in the fourth quarter, chief executive Jamie Dimon told the conference Goldman Sachs Virtual Financial this week.

Bank of America chief Brian Moynihan reported on Wednesday that his bank was benefiting from similar trends.

BofA’s trading revenue increased “by around 15%” from a year ago, in addition to a fourth quarter of 2019 which was also up sharply from 2018. He said the fees for investment bank would increase by 10 to 15%.

Mr Dimon’s comments only suggest a slight slowdown from the third quarter at JPMorgan, when its combined trading and investment banking income jumped nearly 25% from a year earlier. In the second quarter, they were up 66% from the same period in 2019, as Wall Street banks had a windfall quarter.

In contrast, fourth quarter growth at BofA represents a significant acceleration after a third quarter in which financial market revenues grew by just under 5%.

Last week, the CFOs of Citigroup and Morgan Stanley Told at the Financial Times banking summit, they also saw strong trends in the last quarter of the year in their investment banks.

“This reflects the extraordinary environment,” Mr. Dimon said of the performance of the first nine months of the year, a time when the Federal Reserve launched unprecedented asset purchase programs that boosted the market activity. “I think we’ve hit rock bottom and we’re growing,” he said of longer term trends in business income.

Mr Dimon also offered assurances on the outlook for loan losses at JPMorgan, noting that the bank was over-booked for the “base case”, or most likely economic outcome, due to the loan loss charges that it was carrying. ‘she had tallied earlier this year. “There is no doubt that things are better than what people thought a few months ago,” he said.

Mr Moynihan said BofA was likely to start reducing its loan loss provisions. “Each factor we use to define [loan loss] reserves improved this quarter [versus] last quarter. ”

Mr Dimon, who is known as one of Wall Street’s most conservative CEOs, hinted at a cautious approach to freeing up reserves and increasing profits as the United States heads into a “cold winter.”

“People want to be comfortable, and most banks don’t want to be in a situation where reserves go up and down every quarter. . . in a way that you cannot understand.

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