Goldman and JPMorgan roar ahead

Goldman and JPMorgan roar ahead
By Francesco Guerrera in New York and Brooke Masters in London
Copyright The Financial Times Limited 2010
Published: May 10 2010 19:56 | Last updated: May 11 2010 00:15
http://www.ft.com/cms/s/0/d2e2f0c8-5c62-11df-93f6-00144feab49a.html


The trading operations of Goldman Sachs and JPMorgan Chase made money every single business day in the first quarter, a feat that was a first for the companies and underlines the boom in Wall Street’s investment banking revenues.

Goldman’s trading desk recorded a profit of at least $25m (£16.8m) on each of the quarter’s 63 working days, making more than $100m a day on 35 occasions, according to a regulatory filing issued on Monday.

The result, following a series of regulatory probes into Goldman’s trading activities, could fuel criticism of its business model and market behaviour.

However, JPMorgan also achieved a loss-free quarter in its trading unit – making an average of $118m a day, nearly $5m an hour – as it built on the gains made during the financial crisis when rivals faltered or failed.

Goldman’s executives said the trading performance had been due to its robust risk management and booming markets.

The 14 largest global investment banks reported $78.8bn first-quarter revenues, their best numbers in three years and just 1 per cent shy of the record.

Analysts said the resurgence might give ammunition to politicians who want to impose a global banking tax and could strengthen the hand of regulators seeking to force banks to hold more capital and liquid assets against future problems.

“At a time when many individuals are still having to tighten their belts . . . this increases the attractions of forcing the banks to carry a higher share of the burden,” said Richard Reid, research director at the International Centre for Financial Regulation.

Goldman, which is already facing civil fraud charges from US regulators over a mortgage-backed security, could also face particular calls to rein in its operations.

Morgan Stanley analysts found that Goldman had continued to lead the pack in revenue overall in the first quarter as industry leader in equities and in fixed income, currencies and commodities (FICC).

JPMorgan was top for advisory investment banking work, while UBS and Bank of America also made strong gains.

The composition of bank revenues has changed significantly since 17 global investment banks set the peak of $80bn in the first quarter of 2007.

FICC revenues now account for 61 per cent of investment banking revenues globally, compared with about half before the crisis.

FICC division revenues rose by 7 per cent year on year to $49bn for the 14 global banks.

The first quarter is traditionally the strongest for investment banks, providing up to one-third of annual profits.