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Goldman Sachs, JPMorgan Chase and Citigroup have reported bumper profits across their Wall Street divisions, even as they warned that investor exuberance risked driving a recent run up in financial markets into bubble territory.
The three banks reported quarterly earnings on Tuesday that comfortably beat analysts’ estimates, with the resumption of dealmaking lifting investment banking revenues and continued volatility in financial markets boosting trading income.
JPMorgan’s net income increased by 12 per cent from the same quarter a year earlier to $14.3bn, while at Goldman — the bank whose business is most heavily geared towards investment banking and trading — net earnings rose 37 per cent to $4.1bn. Citi’s net income increased by 18 per cent to $3.5bn.
Revenues from investment banking and trading increased by at least 12 per cent at all three banks in a sign that Wall Street’s much-anticipated revival under the Trump administration is finally starting to materialise.
Bankers had expected the administration’s deregulatory stance and falling interest rates would pave the way for a flood of deals after a hiatus of more than two years. That failed to materialise in the early months of the year, however, as companies struggled to understand the impact of the administration’s trade wars on the outlook for growth and earnings.
On Tuesday the banks signalled that they now expected the gains in their Wall Street businesses to continue for the rest of this year and into 2026.
“It was the busiest summer we’ve had in a long time in terms of announced M&A activity,” JPMorgan chief financial officer Jeremy Barnum said. Goldman said its backlog of potential deals ended the quarter at its highest level in three years.
“It’s clear from our conversations in boardrooms that . . . many of our clients have navigated and adapted to the current state of play,” Goldman chief executive David Solomon told analysts.
Chief executives of all three banks sounded the alarm about investor exuberance, however, which they said risked pushing a recent run up in financial markets into bubble territory.
“We have a lot of assets out there which look like they’re entering bubble territory,” JPMorgan’s Jamie Dimon said. “That doesn’t mean they don’t have 20 per cent to go. It’s just one more cause of concern.”
Citi’s chief executive, Jane Fraser, recognised that the global economy had proved more resilient than many had anticipated, with “America’s economic engine . . . indeed still humming”.
But she added, “That said, there are pockets of valuation frothiness in the market so I hope discipline remains”.
Bank executives noted some signs of stress among US borrowers, though they insisted they were generally in strong health.
JPMorgan, the largest US bank by deposits and assets, reported a slight increase in stress in its loan portfolio, with the proportion of loans marked as unrecoverable rising to the highest level since before the pandemic.
“It’s pretty easy to imagine a world where the labour market deteriorates from here,” Barnum said. “I wouldn’t say we’re pounding the table with this view, but we’re just noting . . . that there are risks and that the fact that things are fine now doesn’t mean they’re guaranteed to be great forever.”
JPMorgan also disclosed a $170mn hit from the failure of subprime auto lender Tricolor Holdings. Dimon described the loss as “not our finest moment”.
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