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Trump surge powers JPM and BofA trading divisions

A trading surge powered by Donald Trump’s victory has helped two of the three biggest US banks boost quarterly profits, fuelling hopes Wall Street can extend its post-election resurgence.

JPMorgan Chase’s trading business, the largest in the world by revenues, produced its best ever fourth-quarter. Net income jumped 96 per cent from a year earlier to $3.43bn. At Bank of America’s global markets business, net income soared from $171m a year earlier to $658m, helped by cost-cutting.

Financial stocks resumed a historic rally on Friday, bringing total gains since the election for the 63 largest groups in the sector to $459bn, after the earnings figures eased concerns that they would fail to live up to elevated investor expectations. The S&P 500 Banks index is up 25 per cent since Mr Trump’s election.

Top bankers on Friday reiterated hopes the Republicans’ clean-sweep victory would usher in an era of higher interest rates, lower taxes and lighter regulation.

“The optimism for positive change here at Bank of America, and among our customers is palpable,” said Brian Moynihan, BofA’s chairman and chief executive.

Jamie Dimon, his opposite number at JPMorgan, said: “Hopefully when all is said and done, people will be looking at all the regulations done in the clear light of day, and will correct the things that should have been corrected.”

The results raise expectations for rivals Goldman Sachs, Morgan Stanley and Citigroup, which publish earnings next week.

At New York lunchtime on Friday, JPMorgan shares were just shy of a new record and BofA ​was just below its highest level since 2008.

Jason Goldberg, US banking analyst at Barclays, said: “While companies have been reluctant to quantify any potential positive impact from the changing political backdrop, most sounded optimistic that pro-growth policies would be beneficial over time.

But some analysts warned the stellar trading numbers might reflect a one-off boost from greater volatility in financial markets — particularly because the earnings from the banks’ consumer divisions — and their retail-focused rival Wells Fargo — were more subdued.

At Wells Fargo, profits declined for a second year running and fourth-quarter earnings fell short of analyst forecasts.

California-based Wells also saw expenses rises, in part because it has been hit a series of lawsuits and investigations. An accounting hit of $592m caused by hedging further weighed on the Wells results.

The performance of JPMorgan’s retail division was also indifferent, in part because the US Federal Reserve’s recent decision to raise short-term interest rates came too late in the year to give earnings a significant boost. JPMorgan’s net income from retail slipped 2 per cent from a year earlier to $2.4bn, and the bank posted a fall in net revenues from its credit cards and car-loans division.

Elsewhere, the 12 per cent rise in fixed income trading revenue at BofA was lower than the 15 per cent Mr Moynihan had pointed towards last month. JPMorgan’s net revenues for the quarter of $23.4bn also fell shy of analysts’ estimates of $24.2bn.

BofA said it would buy back an extra $1.8bn of its shares after fourth quarter net income rose 43 per cent to $4.7bn.

Via FT