Apr 14, 2021 - Economy

Wall Street banks pivot from pandemic to boom times

Partying bull

Illustration: Sarah Grillo

Look no further than the flood of bank earnings out today for evidence the pandemic crisis is long over on Wall Street.

Why it matters: Banks are riding high — helped by wild activity in deals and the stock market — as the worst of the pandemic's economic impact sits in the rearview mirror.

The clearest sign: Banks set aside billions of dollars' worth of rainy day funds for potential bad loans when COVID-19 hit.

  • They were too pessimistic. Now that money is going back in the coffers at the quickest pace yet at JPMorgan and Wells Fargo.

At Goldman Sachs: Average balances in its prime brokerage business — the one that services hedge funds and worked with the now blown-up Archegos Capital — hit a record high.

At JPMorgan: "We're buying back stock because our cup runneth over. ... We're holding a tremendous amount of money and we really have no option right now," CEO Jamie Dimon told analysts today.

Catch up quick … 

  • Investment banking boomed, helped by the SPAC-a-palooza. Here JPMorgan raked in record fees, while Goldman's revenue exceeded expectations by $1 billion.
  • Trading desks soared on the back of the market mania. Goldman says revenue here jumped almost 50% from a year earlier.
  • Consumer-related segments were also strong. Spending across JPMorgan’s consumer business — like on its debit cards — returned to pre-pandemic levels. It’s a similar story at Wells Fargo. 

What to watch: Businesses and consumers are still taking out loans at a snail's pace. Loans fell 4% from a year earlier at JPMorgan. Wells Fargo called out tepid loan demand and low-interest rates as a headwind.

What’s happening: Cash (for some) is plentiful, creating less demand. Others might still be too skittish about what’s ahead to take on more debt.

  • “We’re gonna know when the crisis is over when people start borrowing again and when that borrowing ends up showing up in loans,” Jesse Rosenthal, a bank analyst at CreditSights, tells Axios.

What's next: More from big banks.

  • Bank of America and Citigroup earnings are on deck Thursday, followed by Morgan Stanley on Friday.
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