Banks caution over bubble as they report bumper profits
Goldman Sachs, JPMorgan Chase and Citi have reported bumper profits across their Wall Street divisions, even as they warned that investor exuberance risked driving a recent run up in financial markets into bubble territory.
The three banks reported quarterly earnings on Tuesday that comfortably beat analysts’ estimates, with the resumption of dealmaking lifting investment banking revenues and continued volatility in financial markets boosting trading income.
Revenues from investment banking and trading increased by at least 12 per cent at all three banks in a sign that Wall Street’s much-anticipated revival under the Trump administration is finally starting to materialise.
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Wells Fargo leads bank stocks with biggest leap since Trump won second term
Shares in US banks that reported on Tuesday closed mixed, but with investors showing a clear preference for those lenders that were less reliant on their Wall Street businesses.
Wells Fargo ended 7.1 per cent higher after its results topped estimates and it raised its target for a closely watched measure of profitability. It was the stock’s biggest one-day jump since November 6 and positioned Wells Fargo as the best performer in the KBW bank index, which tracks 24 leading US lenders.
Citi was the third-best performer in the KBW, up 3.9 per cent, after reporting solid results.
The only two KBW index members to close lower were JPMorgan Chase and Goldman Sachs, down 1.9 per cent and 2 per cent, respectively. That was despite them reporting strong performances in Wall Street units, which encompass investment banking and trading activities.
Morgan Stanley, the third-worst performer in the KBW, added 0.1 per cent, while Bank of America gained 2.5 per cent before it reports results on Wednesday morning.
Among financials, BlackRock shares gained 3.4 per cent after reporting record assets under management.
Main Street-facing banks stocks fare better than Wall Street cousins
A solid quarter for the investment banking and markets units of several US lenders failed to translate into a meaningful boost to their share prices.
Shares of Goldman Sachs, whose business is most heavily geared towards the fortunes of Wall Street, and JPMorgan were the only two members in the KBW bank index to be in the red just after midday Tuesday. The index tracks the stocks of the two dozen leading lenders in the US.
The next worst performer was Morgan Stanley, which reports on Wednesday and is traditionally regarded as the most direct Wall Street rival to Goldman. Its shares were up 0.4 per cent.
Shares in Wells Fargo and Citi, which have more Main Street exposure, were among the top performers. Bank of America, which reports on Wednesday and is also more consumer-facing, was up 2.6 per cent.
