500 stockmarket index climbed by 13.1% in the first quarter, its best beginning since 1998. But that was little use to Wall Street banks. Trading revenues depend on volumes, not prices. Quarterly earnings, reported in recent days, have confirmed that they were markedly lower than a year earlier. Never mind. The retail divisions of America’s mightiest banks did well enough to boost profits overall. The giants’ retail heft is likely to keep serving them well.
Start, though, with the grim stuff. Share-trading revenues fell by 24%, year on year, at Citigroup and Goldman Sachs; by 22% at Bank of America ; and by 13% at JPMorgan Chase. New share issues were delayed by a 35-day government shutdown that lasted until late January, holding up approvals at the Securities and Exchange Commission; equity-underwriting revenues tumbled by 20% at Citi, 23% at JPMorgan Chase, 29% atand 34% at Goldman.
Banks were helped by wider interest margins and steady loan growth. Now that the Federal Reserve has stopped raising interest rates, that following wind may fade. But the biggest banks will find that easier to live with than their smaller competitors will. And they are determined to make a combination of scale and computing power tell; they are spending billions onhas cut the cost-income ratio at its retail bank from 51% to 45% in the past year.
If America’s giants need further consolation, they should look across the Atlantic to Europe, where banks’ reporting season starts on April 24th. Already losing market share to the Americans on both sides of the pond and trailing in profitability, the Europeans’ woes show no sign of abating. Britain’s Barclays is being pestered by an activist investor, Edward Bramson, who wants it to retreat from investment banking. In March it parted company with Tim Throsby, the head of its investment bank, just two years after he joined. Germany’s Deutsche Bank is in merger talks with its neighbour, Commerzbank, in the increasingly desperate hope of reviving its fortunes.
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