US Banks on Fire | Revenues Soar, and So Do the ProfitsWho Needs a Recession? Banks Are Swimming in Cash!
The largest U.S. banks have reported some of their best quarterly performances in recent years, with surging trading revenues, a resurgence in dealmaking, and an overall renewal of corporate confidence playing pivotal roles. Let’s break down the key details of the results.
Market Recovery
Across the major banks, investment banking and trading activities recorded impressive performances. Goldman Sachs saw investment banking revenue increase by 24%, while Bank of America (BofA) experienced a massive 44% jump, marking its strongest quarter in three years.
The market volatility stemming from factors like the U.S. election and changing expectations around interest rates continued to fuel robust trading revenues. Morgan Stanley’s equities division, for example, reached an all-time high, while JPMorgan and Goldman Sachs enjoyed notable gains in fixed-income trading.
A surge in CEO optimism has led to an uptick in mergers and acquisitions (M&A), initial public offerings (IPOs), and private credit demand. Morgan Stanley, in particular, is seeing the largest M&A pipeline in seven years, signaling a sustained wave of dealmaking.
Mixed Results for NII
Net interest income showed varying results across the banks, but forward guidance indicates that NII will likely see moderate growth in 2025, spurred by continued loan demand and higher asset yields.
Credit Risks on the Rise
Consumer lending pressures have persisted, with JPMorgan’s charge-offs rising by 9%. Many banks are preparing for a further increase in delinquencies, particularly in credit cards.
Commercial Real Estate Challenges
While the office sector remains under stress, banks are managing their exposures cautiously and have yet to face significant shocks in this area.
Regulatory Scrutiny Continues
Citigroup lowered its 2026 profitability target as it undergoes a transformation, while Bank of America faced increased scrutiny over its anti-money laundering compliance.
Resilient U.S. Economy
Banks are reporting strong consumer spending, loan growth, and corporate profitability, which supports an optimistic outlook for earnings growth heading into 2025.
Performance Breakdown for Each Bank
JPMorgan Chase
- JPMorgan posted a record annual net income of $58.5 billion, marking an 18% increase from the previous year.
- Investment banking saw a 46% surge in revenue, driven by strong advisory and equity underwriting.
- Trading revenue climbed by 21%, led by a 20% increase in fixed-income trading.
- Despite the impressive results, JPMorgan is still facing challenges such as rising charge-offs and pressures on loan margins. CEO Jamie Dimon emphasized concerns about persistent inflation and growing geopolitical risks.
Bank of America
- BofA experienced an 11% year over year growth in revenue, reaching $25.3 billion, with net income up 112% from the previous year.
- The investment banking division saw a dramatic 44% rise in revenue, the highest in three years, thanks to strong debt and equity underwriting.
- Trading revenue grew by 10%, driven by solid performance in fixed income (up 13%) and equities (up 6%) as market volatility spurred client activity.
- BofA also reported growth in its consumer and wealth management divisions, with credit card fees and asset management showing strength. Client balances grew to $4.3 trillion, a 12% increase from the previous year.
- After several quarters of decline, BofA’s NII grew by 3%, exceeding expectations and signaling stability. The bank expects NII to continue rising through 2025, with projections of $15.7 billion per quarter by the end of the year.
Wells Fargo
- Wells Fargo’s revenue remained flat at $20.4 billion, but net income surged by 50%.
- NII declined by 8% year-over-year but is expected to rise slightly in 2025 due to higher reinvestment rates on maturing assets.
- The bank made significant progress in cost-cutting efforts, reducing non-interest expenses by 12%, thanks to workforce reductions and efficiency initiatives.
- Investment banking fees rose by 59%, benefiting from the broader market recovery and the bank’s renewed focus on its Wall Street presence.
- Wells Fargo returned $25 billion to shareholders in 2024, including a 15% dividend increase and $20 billion in stock buybacks. However, the bank continues to face regulatory constraints, notably the asset cap imposed by the Federal Reserve.
- Looking ahead to 2025, Wells Fargo anticipates modest growth in fee-based revenue, with cost discipline and efficiency gains driving improvements.
Morgan Stanley
- Morgan Stanley saw a 26% increase in revenue, reaching $16.2 billion, while net income soared by 142%.
- Equity trading revenue jumped by 51%, setting a new all-time high as market volatility sparked increased client activity, particularly in prime brokerage and risk-repositioning trades.
- Investment banking revenue grew by 25%, fueled by strong demand for debt underwriting, stock sales, and M&A activity. CEO Ted Pick noted that the M&A pipeline is the strongest in seven years, signaling a potential multi-year recovery in dealmaking.
- Morgan Stanley’s wealth management division saw $56.5 billion in net new assets, increasing total client assets to $7.9 trillion. The firm is pushing toward its goal of $10 trillion in assets under management.
- In response to growing business complexities, the firm launched a new Integrated Firm Management division to streamline services across investment banking, trading, and wealth management.
Goldman Sachs
- Goldman Sachs experienced a 23% increase in revenue, reaching $13.9 billion, while net income more than doubled, up 105%.
- Record performance in equity trading contributed to a 32% increase in revenue from this segment, as market volatility drove greater client activity.
- Investment banking revenue grew by 24%, boosted by significant gains in equity and debt underwriting.
- The firm’s asset management division saw an 8% rise in assets under management, reaching $3.1 trillion, while management fees exceeded $10 billion for the year.
- Goldman is winding down legacy balance-sheet investments but also saw a gain of $472 million from these investments in Q4. The firm’s recent launch of its Capital Solutions Group is aimed at capturing growth opportunities in private credit and alternative financing.
Citigroup
- Citigroup posted a 12% increase in revenue, reaching $19.6 billion, with non-interest revenue surging 62%.
- Fixed-income and equity markets were key drivers, growing 37% and 34%, respectively, as market volatility tied to the U.S. election boosted performance.
- Investment banking revenue climbed by 35%, supported by strong corporate debt issuance and a pickup in dealmaking activity.
- The bank unveiled a $20 billion stock repurchase program, signaling confidence in future earnings.
- Citigroup also made strides in controlling operating expenses, which declined by 2% quarter-over-quarter. However, the bank lowered its 2026 return on tangible common equity (RoTCE) guidance to 10%-11% due to the costs of its ongoing transformation.
- CEO Jane Fraser emphasized Citigroup’s long-term growth trajectory, noting improvements in credit quality and continued progress with the strategic overhaul, including the postponed IPO of Banamex, the bank’s Mexican retail unit, now expected in 2026.
Long story short
Heading into 2025, the major U.S. banks are in strong positions, buoyed by a favorable economic backdrop, continued growth in trading, and a rebound in corporate dealmaking. Despite challenges such as rising credit risks, regulatory hurdles, and potential macroeconomic uncertainties, the outlook remains positive. With a recovering IPO market, continued wealth management growth, and strong trading revenue, the banks are poised to capitalize on the renewed corporate optimism. The key question will be whether the dealmaking frenzy continues or whether uncertainties in the global economy and market dynamics could temper the rally.
