Banking

Big banks report record 1Q earnings; Coinbase shines in stock market debut

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BofA profit doubles

Bank of America said its first-quarter profit more than doubled to $8.05 billion from a year earlier even as revenue remained flat. The Wall Street Journal noted that the bank “released $2.7 billion of its reserves, boosting its bottom line.” Financial Times

Receiving wide coverage …

Booming profits

“A stock-market boom and a burst of companies entering the public markets produced record quarterly profits at Wall Street’s biggest banks,” The Wall Street Journal reported. “Goldman Sachs posted records in quarterly revenue and profit. JPMorgan Chase notched its highest quarterly profit on record, driven by record revenue from trading stocks. Even Wells Fargo, a minnow on Wall Street, enjoyed its best-ever quarterly profit in corporate and investment banking.”

“The blockbuster results were the latest proof that in both good times and bad, Wall Street can thrive. When markets are chaotic, traders can still turn big profits. When the economy is flailing, bankers can help nervous companies raise cash or sell themselves.”

The better-than-expected performance was “fueled by breakneck growth in investment banking fees, buoyant capital markets and lower credit costs due to an improving economy,” the Financial Times said. “But the traditional banking business of taking deposits and making loans continued to grow less profitably and executives warned that the boost to earnings from those activities would likely fade.”

“The even better news for investors is that core Wall Street businesses are generating huge earnings without needing to use substantially more capital,” the Journal added. “That wasn’t always the case, as volatility and volumes could sometimes force banks to take on even more risk to keep up.”

Crypto validation

Coinbase Global “fetched an $85 billion valuation in its stock market debut Wednesday, a watershed moment for an industry that began a decade ago as an experiment in digital money,” the Journal reported. “Shares of Coinbase, the first major bitcoin-focused company to test the U.S. public market, opened at $381 on the Nasdaq Global Select Market. They rose as high as $429.54 in the first few minutes of trading and ended the session at $328.28.”

“The first listing of a major cryptocurrency exchange [is] a moment of validation for the digital asset class some 12 years after the creation of bitcoin,” the FT said.

“The San Francisco-based exchange’s direct listing on the Nasdaq is both a milestone and test run of the public’s appetite for digital currency,” The Washington Post said. “In the past year, cryptocurrency has been embraced by such brands as Tesla and Square, while Wall Street giants such as Goldman Sachs and Morgan Stanley have taken steps toward offering bitcoin and other digital assets to investors.”

Confirmed

By a vote of 53-to-45, “the Senate confirmed Gary Gensler as chairman of the Securities and Exchange Commission on Wednesday, putting a veteran regulator and banker in charge of the Biden administration’s plan to tighten oversight of Wall Street,” the Journal reported. “A onetime Goldman Sachs executive, Mr. Gensler is known in Washington as a hard-nosed regulator who succeeded in overhauling the swaps market after the financial crisis.”

“Gensler is taking the helm of the agency as the Biden administration seeks stricter oversight and enforcement of financial interests following years of Trump-era deregulation,” the Washington Post said. “He already has laid out an ambitious agenda, signaling he will push rules forcing companies to disclose more about their climate risks and political spending.”

Moving east

HSBC “will move four of its top executives to Hong Kong from London, one more than had been anticipated, as the bank continues to accelerate its strategic shift to Asia,” the FT reported. “Relocating those four executives means that divisions that account for almost all of HSBC’s global revenue will be run out of Hong Kong. The decision also has symbolic importance considering the bank’s delicate geopolitical position, caught amid escalating tensions between the west and China as they face off over the future of Hong Kong.”

“I want more of our global executive team to be located in key growth regions,” HSBC Chief Executive Noel Quinn said, according to the Journal. But “Mr. Quinn assured colleagues that HSBC will continue to be based in London and maintain a global presence.”

“We remain fully committed to the U.K., both in terms of our domicile and our significant businesses and client base in the country,” he said. “These moves have no impact on the location of our headquarters and the management and oversight of the group executive committee.”

Wall Street Journal

Vindicated

Barclays’s stock has “risen 28% this year, making it one of the best-performing investment-banking stocks and taking it briefly above its pre-pandemic level. JPMorgan Chase, by contrast, is up 19%, and Morgan Stanley has risen 18%. Spurring the recovery is a surge of activity in the U.K. lender’s investment-banking arm. It is a vindication for Chief Executive Jes Staley, who has clung to the idea that a robust investment bank complements Barclays’s traditional British banking operations.”

Green pledge

JPMorgan Chase “is pledging to facilitate $2.5 trillion worth of climate-conscious transactions over the next decade. The bank said it would deploy its own capital and offer its expertise to help clients and customers to ‘accelerate the transition to a low-carbon economy.’ It is unclear how much of the $2.5 trillion will come from JPMorgan itself. All relevant transactions the bank finances, structures or otherwise facilitates will count toward the target, the bank said.”



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