Goldman Sachs Group Inc. and JPMorgan Chase & Co. – the two largest financial institutions in the world – in the first quarter they made good money on trading and dealing. The reporting for the first three months of 2021 dispelled the myth that traditional financial institutions have outlived their usefulness and their time has passed. In part, banks have capitalized on the optimism of small investors who tried to revolutionize in January.
Goldman Sachs earned more in the first three months of the year than in any other quarter of the past decade; JPMorgan’s revenue is up 25%. The underwriters brought the banks the most money by helping so-called SPACs attract investors and set the stage for future mergers.
“Wow,” Susan Roth Katzke, an analyst at Credit Suisse Group AG, reacted to the earnings of Goldman Sachs, which is more dependent on Wall Street operations than others. “Very impressive”.
Goldman jumped 4.7% in New York morning trading on Wednesday, while JPMorgan shed 0.3% amid concerns about weaker loan demand.
Trading is on the rise
For months, executives and analysts have warned that interest in trading and dealing was fueled by market volatility amid the pandemic. However, this trend is now fading, and revenues in 2021 will be much lower than the values of 2020.
However, the forecasts did not come true and the industry is booming again.
In January, retail investors chatting on forums on Reddit began buying up GameStop Corp. shares. and other meme companies that have fallen out of favor with traditional financial institutions. Day trading in the stock market has become an international sport. Market volumes remained strong, according to Goldman’s earnings report, even as volatility began to subside by the end of the quarter.
Overall, Goldman traders increased revenue by 47% to 7.58 billion, which is 2 billion above the forecast. Dealers at Goldman are having hot days, too. Investment banking fees excluding corporate lending doubled.
At JPMorgan, earnings from stock trading rose 47% to $ 3.29 billion, beating even the highest estimates from Bloomberg analysts. Investment banking fees jumped 57% to $ 2.99 billion
The market will slow down
However, analysts warn that JPMorgan and Goldman’s results do not yet herald a new golden age on Wall Street. Both companies recorded a decline in revenue from currency trading. This area is dominated by Citigroup. Citigroup and Bank of America Corp. will publish quarterly results on Thursday. Morgan Stanley will report on Friday.
This raises the question of how long this period will last. Goldman Sachs CEO David Solomon refrained from forecasting.
“The first quarter was unusual,” he told analysts by phone. “I don’t think we should expect the same activity in the third and fourth quarters.”