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LGT Navigator: Trading boom results in record profits for US banks

April 15, 2021

The big US banks report record results in the first quarter thanks to high trading activity. The crypto platform Coinbase makes the leap to Wall Street and Fed Chairman Jerome Powell once again confirms the monetary policy course of the Federal Reserve.

High trading activity

US stock markets took a breather on Wednesday. The S&P 500 closed -0.4% below the record of the previous day and the Nasdaq Composite declined -1%. In contrast, the Dow Jones recovered Tuesday's losses and gained +0.2%. 

On the Asian stock markets, the mood is subdued. The Nikkei traded unchanged in Tokyo. The Shanghai Composite and the Hang Seng lose -1% each.

Record results for major US banks

The big American banks have started the new year with a lot of momentum. Thus, the investment bank Goldman Sachs reported record results for the past quarter, significantly beating market expectations. The bank more than quintupled its profits compared to the previous year. The investment banking division, in particular, contributed to the success, with revenues in equity and bond trading growing significantly.

JPMorgan Chase also reported a jump in profits in the first quarter and exceeded analysts' estimates: at USD 14.3 bn, profits were almost five times as large as in the same period last year. Like its rival Goldman Sachs, the bank benefited from strong results in equity and bond trading. In addition, JPMorgan released USD 5.2 bn in reserves it had set aside a year ago to prepare for possible loan losses in the wake of the corona crisis. As the situation has so far developed better than feared, the reserves are now being gradually reduced.

The third in the group, Wells Fargo, followed up on the success stories. The San Francisco-based bank, which holds a strong position in the US mortgage business, increased its profit sevenfold compared with the same quarter last year. It also freed up reserves and implemented cost-cutting measures.

Successful stock market debut

The crypto platform Coinbase has made the leap to Wall Street. The shares started trading on the Nasdaq on Wednesday afternoon at a price of USD 381. In the course of trading, the shares climbed to USD 430 and finally closed at USD 328.28. This values the company with a market capitalization of around USD 65 billion (excluding options). Coinbase operates the largest US trading platform for digital currencies and is used by around 56 million customers worldwide. For the still young crypto industry, this IPO could mark a turning point and make cryptocurrencies accessible to a broad audience.

Powell confirms low interest rate policy

Federal Reserve Chairman Jerome Powell once again confirmed the Fed’s monetary policy course in a speech. Only when full employment is reached and inflation is sustainably above 2%, an adjustment of monetary policy is up for debate, Powell said during a virtual event of the Economic Club of Rome. As a first step, the Fed would then reduce its bond purchases. According to Powell, however, this scenario is unlikely to materialize before the end of 2022. 

Further aid package for Italy's economy?

According to media reports, the Italian government is considering further aid measures to support the economy in the corona crisis. This involves a sum of around EUR 40 bn, several newspapers reported on Wednesday. Discussions are to continue on Thursday. The government has already approved a EUR 32 bn aid package to boost the economy. 

European industrial production shrinks

European industrial production shrank in February after a good start to the year, falling -1% from January, the statistics office Eurostat reported. Analysts had expected an even sharper decline of -1.3%. In January, production had still grown by +0.8%. Also in comparison with the previous year, a minus resulted. Thus, the European industry produced in February 2020 1.6% more goods than this year.

 

 

Economic Indicators April 15

MEZ Country Indicator Last
08:00 GE Consumer price index (March) +0.1%
08:45 FR Consumer price index (March) +3.0%
14:30 US Retail sales (March) +5.2%
14:30 US Philly Fed Index (April) 17.40
14:30 US Empire State Index (April) 51.80

Earnings Calender April 15

Country Corporate Period
US Citigroup Q1
US Bank of America Q1
US PepsiCo Q1

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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