The bosses of two of America’s largest banks signalled a strong fourth quarter for their trading and investment banking businesses, closing out a year when volatility and central bank interventions paid off handsomely for Wall Street.
JPMorgan Chase’s trading and investment banking revenues “are up about 20 per cent, maybe a little more” so far in the fourth quarter, chief executive Jamie Dimon told this week’s Goldman Sachs virtual financial conference.
On Wednesday, Bank of America chief Brian Moynihan reported that his bank was enjoying similarly strong trends.
Trading revenues at BofA were up “about 15 per cent” compared with the year before, on top of a 2019 fourth quarter that was also up strongly from 2018. He said that the investment banking fees would be up 10 to 15 per cent.
Mr Dimon’s comments suggest only a minor slowdown from the third quarter at JPMorgan, when its combined trading and investment banking revenues jumped almost 25 per cent from a year earlier. In the second quarter, they were up 66 per cent versus the same period in 2019, as Wall Street banks enjoyed a bonanza quarter.
By contrast, fourth-quarter growth at BofA represents a significant acceleration after a third quarter in which capital markets revenue grew just under 5 per cent.
Last week the chief financial officers of Citigroup and Morgan Stanley told the Financial Times banking summit that they had also seen strong trends in the final quarter of the year at their investment banks.
“It’s reflective of the extraordinary environment,” Mr Dimon said of the performance for the first nine months of the year, a period when the Federal Reserve launched unprecedented asset purchase programmes that spurred market activity. “I do think we hit the bottom, and we’re growing,” he said of the longer-term trends for trading revenues.
Mr Dimon also offered reassurance on the outlook for loan losses at JPMorgan, stressing that the bank was over-reserved for the “base case”, or most likely economic outcome, because of loan loss charges it booked earlier this year. “There’s no question that things are better than people thought a few months ago,” he said.
Mr Moynihan said BofA was likely to start lowering its loan loss provisions. “Every single factor we use to set [loan loss] reserves has gotten better this quarter [versus] last quarter.”
Mr Dimon, who is known as one of Wall Street’s more conservative CEOs, hinted at a cautious approach to releasing reserves and boosting profits as the US heads into a “cold winter”.
“People want to be comfortable, and most banks don’t want to be in a position with a swing of reserves up and down every quarter . . . in a way you can’t understand.”
Get alerts on US banks when a new story is published