NEW YORK (Reuters) – Profits for some of the largest U.S. banks rose in the fourth quarter as dealmaking picked up and trading boosted thanks to strong stock markets, sending bank stocks higher on Wednesday.
The market environment was favorable for banks. Stock markets rose, with the S&P 500 rising 23.3% in 2024, while deal volumes rose and strong demand for bond collateral boosted investment banking fees.
Bank stocks 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 announce their results on Thursday.
“Animal instincts are back,” said Stephen Biggar, a banking analyst at Argus Research, referring to the tendency of investors’ emotions to drive stock prices. “There are good times to be over-exposed to capital markets income, and this is one of them.”
Goldman Sachs recorded its largest quarterly profit since the third quarter of 2021 at $4.11 billion, thanks to deal fees, debt sales and trading. Its global banking and markets revenues in the fourth quarter rose 33.4% year over year, and the bank posted record annual net equity revenues.
The bank said in a statement that its expectations for investment banking fees were greater in December than in September, providing an optimistic outlook for the coming months.
JPMorgan Chase reported a nearly 50% rise in net income as investment banking fees and trading revenue jumped in the latest quarter, with CEO Jamie Dimon hoping for more favorable conditions ahead.
The earnings reports come days before the inauguration on Monday of President-elect Donald Trump, who has touted a deregulation and tax-cutting agenda. Easing regulatory restrictions could lead to an uptick in deal making, boosting banks’ fee revenues.
“Businesses are more optimistic about the economy, encouraged by expectations for a more pro-growth agenda and improved cooperation between government and business,” Dimon said in a statement.
A rebound in dealmaking sent Wells Fargo’s profits up 47.3% to $5.1 billion, as investment banking fees jumped 59% to $725 million in the quarter from a year earlier.
Citigroup’s quarterly earnings beat estimates, helped by more trades and deals. Its investment banking revenues rose 35% to $925 million.
2025 forecast
The possibility of looser regulatory restrictions under Trump may help improve banks’ performance. Michael Barr, the Federal Reserve’s chief regulatory officer, announced this month that he would resign. His exit paves the way for Trump to appoint an official with a more industry-friendly agenda.
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