NEW YORK (Reuters) – Profits at a few of the biggest U.S. lenders rose within the fourth quarter as dealmaking picked up and trading was boosted by strong equity markets, sparking a rally in banking stocks on Wednesday.
The market environment has been favorable for banks. Equity markets have surged, with the S&P 500 climbing 23.3% in 2024, while deal volumes have risen and powerful demand for bond underwriting boosted investment-banking fees.
Shares among the many banks that reported earnings on Wednesday rose between 5.9% for Goldman Sachs and 0.9% for JPMorgan Chase. Bank of America and Morgan Stanley will report results on Thursday.
“Animal spirits are back,” said Stephen Biggar, banking analyst at Argus Research, referring to the tendency for investors’ emotions to drive stock prices. “There are good times to be over-exposed to capital markets revenues, and that is considered one of them.”
Goldman Sachs recorded its biggest quarterly profit for the reason that third quarter of 2021, at $4.11 billion, helped by deal fees, debt sales and trading. Its fourth-quarter global banking and markets revenues rose 33.4% year-over-year and the bank posted record net annual revenues in equities.
The bank said in a press release its prospects for investment-banking fees were greater in December than they were in September, offering an optimistic outlook for the approaching months.
JPMorgan Chase posted a roughly 50% rise in net income as each investment banking fees and trading revenues jumped within the last quarter, with CEO Jamie Dimon hopeful of more favorable conditions to come back.
The earnings reports come days before Monday’s inauguration of President-elect Donald Trump, who has promoted an agenda of deregulation and lower taxes. Lighter regulation could spark an uptick in dealmaking, boosting banks’ fee revenues.
“Businesses are more optimistic concerning the economy, and so they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business,” Dimon said in a press release.
A rebound in dealmaking drove Wells Fargo’s profit 47.3% higher, to $5.1 billion, as its investment-banking fees jumped 59% to $725 million within the quarter compared with a 12 months earlier.
Citigroup’s quarterly profit beat estimates, helped by more trading and deals. Its investment-banking revenue soared 35% to $925 million.
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The potential of softer regulation under Trump may help improve banks’ performance. Michael Barr, the Federal Reserve’s top regulatory cop, announced this month he’ll resign. His exit clears the way in which for Trump to appoint an official with a more industry-friendly agenda.