NEW YORK (Reuters) – Profits at some of the largest U.S. lenders rose in the fourth quarter as deals accelerated and trading was boosted by strong stock markets, leading to a rally in bank stocks. on Wednesday.
The market environment has been favorable for banks. Stock markets have soared, with the S&P 500 rising 23.3% in 2024, while trading volumes have increased and strong bond underwriting demand boosted investment banking fees.
Shares of banks that reported earnings 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, a banking analyst at Argus Research, referring to the tendency of investor emotions to drive up stock prices. “There are good times to be overexposed to capital markets inflows, and this is one of them.”
Goldman Sachs posted its highest quarterly profit since the third quarter of 2021 of $4.11 billion, helped by transaction fees, debt sales and transactions. Its global banking and markets revenue in the fourth quarter increased 33.4% year over year and the bank posted record annual net earnings in shares.
The bank said in a statement that its outlook for investment banking fees was higher in December than in September, offering an optimistic outlook for the coming months.
JPMorgan Chase posted a roughly 50% increase in net income as both investment banking fees and trading revenue rose in the latest quarter, and CEO Jamie Dimon is hopeful that they are coming more favorable conditions.
The earnings reports come days before the inauguration Monday of President-elect Donald Trump, who has promoted an agenda of deregulation and tax cuts. Lighter regulation could spark a rebound in trading, boosting banks’ fee income.
“Businesses are more optimistic about the economy and are encouraged by expectations of a more pro-growth agenda and better collaboration between government and business,” Dimon said in a statement.
A rebound in deals pushed Wells Fargo’s profits 47.3% higher to $5.1 billion, while its investment banking fees rose 59% to $725 million in the quarter compared with a year earlier.
Citigroup’s quarterly earnings beat estimates, helped by more transactions and deals. Its investment banking revenue soared 35% to $925 million.
OUTLOOK FOR 2025
The prospect of lighter regulation under Trump may help improve banks’ performance. Michael Barr, the Federal Reserve’s top regulator, announced this month that he will resign. His departure paves the way for Trump to appoint an official with a more industry-friendly agenda.