JPMorgan, Goldman Sachs drive Wall Street profit surge
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The news: JPMorgan Chase, Goldman Sachs, Citigroup and other US banks reported strong and better-than-expected, 4Q earnings, driven by a resurgence in trading, investment banking and dealmaking.
The context: Revenue growth was fuelled by heightened corporate optimism, increased CEO confidence and strong equity and debt markets.
The profit increases were magnified by the absence of 2023’s Federal Deposit Insurance Corp charges to replenish the deposit insurance fund after the regional banking crisis.
The results come as regulatory rollbacks under the Trump administration are expected to ease capital requirements and support growth.
The numbers: JPMorgan’s 4Q net profit rose 50% to USD14 billion, while Goldman Sachs’ profit more than doubled to USD4.11 billion.
Citigroup posted USD2.86 billion in profit during the three months ending 31 December, recovering from a loss over the same period the year prior. The Jane Fraser-led lender also announced a USD20 billion share buyback program.
At Wells Fargo, the fourth largest US bank by assets, profit jumped 47% to USD5.08 billion on solid investment banking fees. Its gains were magnified due to the FDIC charges related to the regional banking crisis in 2023 that did not repeat this year.
Meanwhile, The Bank of New York Mellon, the oldest bank in the US, reported a 462% year-on-year increase in fourth-quarter net income to USD1.2 billion, beating Wall Street estimates. That reflected the 2023 FDIC charges, but was also helped by higher fee revenue and boosted by a market rally, with assets under custody and administration rising 9% to USD52.1 trillion.
What they said: Jamie Dimon of JPMorgan and other executives cited ongoing inflationary pressures and geopolitical risks as concerns.
“Geopolitical conditions remain the most dangerous and complicated since World War II,” Dimon said. “Ongoing and future spending requirements will likely be inflationary, and therefore, inflation may persist for some time.”
He added: “The US economy has been resilient. Unemployment remains relatively low, and consumer spending stayed healthy, including during the holiday season. 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.”
Goldman Sachs CEO David Solomon said “I’m encouraged that we have met or exceeded almost all of the targets we set in our strategy to grow the firm five years ago.”
Citigroup’s Fraser said “2024 was a critical year and our results show our strategy is delivering as intended. While we now expect our 2026 ROTCE to be between 10% and 11% in order to make additional investments in our businesses and transformation, this level is a waypoint, not a destination.”
“We intend to improve returns well above that level and deliver Citi’s full potential for our shareholders,” she added.
Addressing its multi-year effort to resolve regulatory issues stemming from a 2016 fake accounts scandal, Wells Fargo CEO Charlie Scharf said: “I’m confident that we will successfully complete the work required in our consent orders and embed an operational risk and compliance mindset into our culture.”
The bank remains under a USD1.95 trillion Federal Reserve asset cap, which limits growth until governance and risk management improvements are deemed satisfactory.
Wells Fargo CFO Michael Santomassimo noted optimism about 2025 dealmaking activity. “There’s a sense of optimism that people have for the activity levels that we should see in 2025—that obviously needs to translate into actual deal activity,” he said. “Market participants feel more confident in their ability to execute on M&A.”
David Wagner, a portfolio manager at Aptus Capital Advisors said "We were most impressed with (JPMorgan’s) big revenue beat and, importantly, net interest income was quite strong. It seems like the behemoth should continue to see the path of least resistance to be higher."
