Record investment banking fees helped JPMorgan Chase retain its Wall Street crown on Tuesday, while rival Goldman Sachs was knocked by a 27 per cent drop in profits following losses on tech investments such as WeWork and Uber.
JPMorgan, the US’s biggest bank, and trading powerhouse Goldman bookended a bumper earnings day for US banks that also included lacklustre third-quarter results from Citigroup and Wells Fargo.
JPMorgan was the standout performer of the four big banks, with net income rising 8 per cent to $9.1bn. Revenues were up 8 per cent to $29.3bn in the three months to end September. Both numbers beat analyst expectations, and JPMorgan was rewarded with a 4 per cent rise in its share price by lunchtime in New York.
“JPMorgan is best in class of global banks and it shows this quarter,” said Wells Fargo analyst Mike Mayo. The results included the best third quarter ever for JPMorgan’s investment banking division, which handled the catastrophic attempt to float WeWork, and several other listings that plunged in value after they begun trading.
Jamie Dimon, JPMorgan’s chief executive and chairman, repeatedly declined to comment on the bank’s relationship with WeWork, but Jenn Piepszak, finance chief, said the financial impact of the group’s situation was “not material” for the bank and “within our risk appetite”.
“We continue to support our client through a complex situation and are working with them through alternative financing strategies,” she said.
Ms Piepszak added that although the pipeline of investment banking deals was strong, fourth-quarter fees were expected to be lower than the third quarter of 2019 and the fourth quarter of 2018.
Other parts of the bank also performed strongly, including a 25 per cent increase in revenues from fixed income trading revenues against a year ago, and a 10 per cent rise in credit card sales volumes. Mr Dimon said the results demonstrated “broad-based strength and the resilience of our business model despite a more challenging interest rate backdrop”. However, he struck a note of caution for the future, warning that US economic growth had “slowed slightly”.
At Goldman, where investors eagerly await a strategic plan in January, third-quarter net income of $1.8bn was dragged lower by $80m of losses on the bank’s proprietary stake in WeWork and $267m of provisions against stakes it holds in publicly listed companies, such as Uber, Tradeweb and Avantor.
Goldman’s investment banking fees were down 15 per cent year on year to $1.69bn, in contrast to JPMorgan’s 8 per cent rise, and Citigroup’s 4 per cent rise. Markets revenues were a bright spot for Goldman, rising 6 per cent year on year to $3.29bn. Goldman’s shares fell as much as 3.3 per cent in early trading, before rebounding to trade flat in a session during which the Dow Jones US banks index was up nearly 3 per cent.
David Solomon, Goldman chief executive, said it would take time for the bank to reap rewards from investments such as online bank Marcus and its Apple credit card. “I do believe, over time, markets will reward us,” he said.
Marty Mosby, an analyst at Vining Sparks, said he was not too concerned about the results, as Goldman was “investing in the rollout of their consumer bank, which should help generate higher returns in 2020”.
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