Investment bankers within big Wall Street firms are taking in more money than ever before to boost earnings. Shareholder response: look at the other questions.
JPMorgan ChaseRecord revenue from dealmaking, Goldman SachsThe group also hit the second-highest level ever, but failed to distract investors from weaker-than-expected fixed income trading, rapidly rising costs and future uncertainty. Both companies' profits beat analysts' expectations, but their shares fell on Tuesday.
While the performance data show that consumers have begun to shake off the impact of the epidemic blockade and that banks have found ample profit opportunities as companies adjust their operations, investors are concerned about other issues. Will a series of events on Wall Street force companies to raise pay? How long will it take to reverse stagnant demand for loans and recover from persistently low interest rates that are a drag on banks' income?
"in short: solid quarterly performance, market-related activities, consumer spending levels and creditThe quality shows the strength and speed of the economic recovery, "Credit Suisse Group analyst Susan Roth Katzke said in a report to clients on JPMorgan's results. "when this strength will be reflected in higher interest rates and widespread loan growth-the second part of the recovery-is an open question."
JPMorgan Chase shares closed down 1.5% in New York, after falling 2.9% in intraday trading. Goldman Sachs closed down 1.1%.
In many ways, this quarter is the opposite of that of a year ago, when traders profited handsomely from wild market volatility and the economic outlook was somewhere between gloomy and frightening. Today, the surge in deals has slowed, and dealmakers are struggling to keep up with demand as companies raise money, seek acquisitions and take other steps to realign their strategies to an improved environment. Consumers have also resumed shopping and travel.
Bank stocks have digested most of the impact. Before JPMorgan Chase and Goldman Sachs kicked off the banking interim earnings season, the s & p 500 financial index has risen 26% so far this year-more than the s & p 500's 17% gain. Investors are eager to know what happens next.
JPMorgan stressed that the forecast for net interest income was uncertain. Consumer spending has increased, but only after receiving stimulus money. This makes it more difficult to predict whether the increased spending will translate into higher credit card balances. The bank left its net interest income guidance unchanged at $52.5 billion after failing to meet analysts' estimates in the second quarter.