Volkswacht Bodensee - US bank profits rise as Wall Street hopes for merger boom

Profits climbed for US financial heavyweights including JPMorgan Chase and Goldman Sachs, in part because of the absence of large costs in 2024's year-ending quarter.

In the equivalent period in 2023, banks set aside large sums to replenish a US rescue program following the collapse of Silicon Vally Bank.

JPMorgan Chase's fourth-quarter profits jumped 50 percent to $14 billion, while Goldman Sachs' more than doubled to $3.9 billion.

In both cases, huge increases in revenues tied to trading were a standout category, reflecting a buoyant environment in a period that included the US presidential election and a heady aftermath on Wall Street.

Citi reported profits of $2.9 billion, compared with a loss of $1.8 billion during the 2023 quarter, while Wells Fargo's profits rose 47 percent to $5.1 billion.

Gains in banking shares helped lift Wall Street stocks Wednesday.

Many financial firms are salivating over the prospects of the shift to the administration of President-elect Donald Trump, who is expected to scale back the confrontational regulatory approach of the outgoing Biden administration.

"There's no question that were in a kind of animal spirits moment right now," said JPMorgan Chief Financial Officer Jeremy Barnum, alluding to an uptick in the "pipeline" of merger and acquisition (M&A) activity.

"All eyes are on the US in a big way," said Citi Chief Financial Officer Mark Mason.

"Generally people are looking at the US with what's likely to be a pro-growth agenda," Mason said on a briefing with reporters. The bank's M&A pipeline is "very strong," he added.

A wave of corporate mergers would translate into increased advisory fees at banks after the Biden administration's broadly skeptical view of dealmaking discouraged some transactions.

The industry also stands poised to benefit from an easing of bank regulation that could free up funds currently required to be held as emergency capital. Instead, banks could lend that money, or return it to shareholders.

- US economy 'resilient' -

At JPMorgan, a successful fourth quarter lifted annual profits to $58.5 billion, up 18 percent.

Profits increased in JPMorgan's commercial and investment bank business, driven by higher advising fees and a surge in fixed income and equity trading. JPMorgan also scored higher asset and wealth management fees.

These areas of strength offset a two percent decline in net interest income, the result of lower interest rates. JPMorgan also experienced higher credit charge offs, while adding net reserves of $267 million in case of bad loans.

Chief Executive Jamie Dimon described the US economy as "resilient," with relatively low unemployment and solid consumer spending.

"Businesses are more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business," Dimon said.

However, Dimon pointed to the risk that elevated inflation will persist and to geopolitical conditions that remain "the most dangerous and complicated since World War II."

Meanwhile, at Goldman, revenues tied to equity and fixed income, currency and commodity trading rose by double digits, while interest rate products were essentially flat.

Goldman also won higher revenues in equity and debt underwriting. While advisory revenues were lower, Goldman said the investment banking fees backlog rose compared with the prior quarter.

A Goldman powerpoint listed an "improving" regulatory backdrop among the supporting factors for the firm's business.

"With an improving operating backdrop and growing CEO confidence, we are harnessing the power of One Goldman Sachs to continue to serve our clients with excellence and create further value for our shareholders," said Chief Executive David Solomon.

All four banks rose on Wall Street. At mid-morning, JPMorgan was up 0.8 percent, Goldman Sachs 5.9 percent, Citi 6.2 percent and Wells Fargo 5.2 percent.

P.Vogel--VB