U.S. banks reporting their first earnings under Donald Trump’s presidency showed a stark split: Wall Street businesses are faring better than many of those serving Main Street.
JPMorgan Chase & Co. and Citigroup Inc., the two largest U.S. trading firms, posted first-quarter results that beat analysts’ estimates as revenue from buying and selling stocks, bonds and other instruments outpaced expectations. Wells Fargo & Co., which focuses more on more traditional forms of banking to consumers and businesses, reported sluggish results and said total loans fell from the fourth quarter.
The figures show how Wall Street businesses criticized during the presidential campaign are thriving as Trump sets out to reshape policy and the Federal Reserve embarks on interest-rate hikes. Political turmoil and changing central bank policies spurred interest-rate trading in the quarter while the threat of higher borrowing costs drove corporations to issue debt, which gave a boost to credit trading. Rising U.S. equities also fueled trading desks.
Financial stocks surged after the November election as investors speculated that Trump would sideline Wall Street’s sharpest critics, dismantle regulation and pursue policies that spur inflation and lift long-term interest rates. He reversed course this week on some other key parts of his campaign rhetoric -- backing off protectionist policies and praising the Federal Reserve’s Janet Yellen -- in a sign he’s listening more to moderate advisers from finance, including former Goldman Sachs Group Inc. President Gary Cohn.
‘Healthy’ Trading
After a relatively slow start to the year, markets improved in March, JPMorgan Chief Financial Officer Marianne Lake said Thursday on a call with analysts. That helped her bank post a fourth straight quarter of increased trading revenue, the longest streak in at least a decade.
“The competition is back and healthy,” she said.
JPMorgan’s fixed-income trading revenue rose 17 percent to $4.22 billion, driven by rates trading linked to central bank actions, improved credit trading and upcoming elections in Europe. The firm also showed a surprise increase in equity trading, which rose 2 percent to $1.61 billion.
At Citigroup, fixed-income traders posted their best quarter in three years, with revenue jumping 19 percent from a year earlier to $3.62 billion. Equities desks boosted revenue 10 percent to $769 million, within a percentage point of what analysts predicted.
PNC’s Outlook