JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Bank of America Corp (NYSE:BAC) and Goldman Sachs Group Inc (NYSE:GS) announced strong second-quarter results exceeding Wall Street expectations.
The recent results from the top U.S. banks clearly provide sufficient pointers that the financial sector is steadily emerging from the recent economic crisis, despite challenges posed by new regulations and the slowdown in emerging markets.
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Goldman Sachs revenue doubled, beating Wall Street expectations
Goldman Sachs Group Inc (NYSE:GS) reported a 108 percent increase in its second-quarter earnings aided by strong performance at its fixed income, currency and trading divisions. Despite crawling mergers and acquisitions business, the top investment bank posted a 40 percent increase in its debt underwriting revenue and over 55 percent in its equity underwriting revenue.
Despite regulatory initiatives making its trading and investment units expensive, Goldman Sachs Group Inc (NYSE:GS) reported a healthy 10.5 percent return on equity. The recent results show the ability of the investment bank to reorient its strategies to beat analysts’ expectations.
Some analysts feel Goldman Sachs strong performance was aided by a favorable tax rate of 30.4 percent as against 33 percent in the previous quarter, thanks to the bank’s classification of certain assets as designated for use abroad.
Wells Fargo beats mortgage blues
The fourth-biggest U.S. bank, Wells Fargo & Co (NYSE:WFC), set a new record net income of $5.5 billion, as its diluted earnings per share grew for the 14th quarter in a row. Despite a slow down experienced in the mortgage market, the nation’s largest home lender posted a strong 19 percent increase in second-quarter profit, thanks to declining expenses and growth across the bank’s deposit and broad lending business.
Despite its recent strong performance, some analysts feel Wells Fargo & Co (NYSE:WFC) could be affected when the Federal Reserve actually increases the interest rates. Such an increase would put a crimp in Wells Fargo’s refinance business, as its refinance business contributes 54 percent of mortgage applications.
Bank of America gains from cost-cutting initiatives
Bank of America Corp (NYSE:BAC) reported a 70 percent increase in its second-quarter profit aided by higher revenue from equity sales and trading, besides initiating aggressive cost-cutting measures. However, its mortgage business continues to struggle. The bank is one of the financial institutions more susceptible to changes in the core economy, particularly the housing market.
Some analysts, however, feel Bank of America Corp (NYSE:BAC)’s performance can be uneven over long periods, as the bank chose to rely on Wall Street businesses.
JPMorgan’s investment banking business shines
Top U.S. bank JPMorgan Chase & Co. (NYSE:JPM)’s second quarter earnings rose 31 percent aided by strong growth seen in its investment banking business, coupled with reduction in reserves for loan losses.
JPMorgan Chase & Co. (NYSE:JPM)’s various divisions contributed to the strong second-quarter growth. Its mortgage originations rose 12 percent, while the bank’s credit card business rebounded with 10 percent increase in sales volume. The bank’s investment banking arm saw a growth of 19 percent in profit, while revenue from JP Morgan’s asset management business and private banking business grew by 28 percent and 11 percent respectively.
Recently, we also analyzed performance of the top U.S. banks’ second quarter results on five major parameters.