When the market swings, traders rush to make changes to their portfolios—and banks profit.
Some of the nation’s largest banks brought in record-high trading revenue against the backdrop of this quarter’s stock market volatility. Goldman Sachs, JPMorgan Chase, and Morgan Stanley all broke records for stock trading gains. Together, those three banks earned more than $12b in equities fees.
Year over year, Citi’s equity trading revenues were 23% higher, Goldman’s grew 27%, and Bank of America’s increased 17%. Morgan Stanley’s equity trading revenue was up a whopping 45% YoY, and JPMorgan’s topped that at 48%.
Trading went on at an even more frenzied pace this quarter than it did during the pandemic, according to the Wall Street Journal. Clients are doing more international trading, reducing their exposure to the US while investing more abroad, especially in the EU and South America, the Journal reported.
The trading gains boosted large banks’ quarterly earnings overall. Goldman, Bank of America, JPMorgan, Citi, and Morgan Stanley all beat estimates for revenue and earnings per share, in some cases quite handily. Goldman had its third-highest quarterly revenue and saw its profit increase 15% YoY. Morgan Stanley’s revenue rose 17% YoY to a record $17.7b.
Consumers still spending: Surveys have shown a dip in consumer sentiment, but several of the largest banks said they haven’t yet seen signs that consumers are suffering. Bank of America and Citi both said consumer spending was up, the Wall Street Journal reported. JPMorgan reported a 7% increase in credit/debit card spending, though the bank noted some of that may have been anticipatory spending as consumers make purchases before tariffs hit.
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“The signals at this point from the consumer are that the US economy still remains in good shape,” Bank of America CFO Alastair Borthwick said. JPMorgan CFO Jeremy Barnum said his bank is not seeing signs consumers are struggling, including lower-income consumers, Reuters reported, but observed that they may be spending more ahead of tariffs.
Business clients are wary: Signs of caution are more evident among businesses. Banks are seeing a slowdown in dealmaking. “People are being cautious and pulling back on deals. The middle-market companies are being very cautious on investments," JPMorgan’s CEO, Jamie Dimon, said, per Reuters.
Citi CFO Mark Mason said companies are “prepping for more headwinds,” according to the Wall Street Journal. “Some companies are bolstering already strong balance sheets. Others are accelerating imports to stockpile inventory.”
Indeed, “uncertainty,” “volatility,” and “turbulence” were a common refrain throughout the big banks’ earnings season. Mason called out not only tariffs as a cause of uncertainty but also “the broader agenda, deregulation, tax policy, etcetera.” The unease is “putting kind of downward pressure on the outlook for growth,” he said.
A “timely resolution” to trade tensions “which benefits the US would be good for businesses, consumers, and the markets,” Wells Fargo CEO Charlie Scharf said.