Banks Doing Well on Wall Street – Trading revenues up
Last quarter results for banks have been coming out since last week and they are better than analyst expected. Results for the largest banks in America which include JP Morgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Bank of America (NYSE:BAC) has shown has shown positive returns in the year’s third quarter.
However where are there profits coming from? Well majority of their profits happens to come from their trading operations. In short Wall Street.
Dodd-Frank Act can’t hold them back
Banks have been seriously restricted from high risk trading options by the Dodd-Frank Act of July 2010. This has largely limits banks from trading or facilitating the trading of securities from large institutional customers.
Usually banks would acquire securities the moment an opportunity arises and then sell to other large institution. This is called ‘Market Making’. The act therefore sorely reduces the risk of Banks suffering huge losses due to taking on high risk investments. It protects taxpayers who are stakeholders in large institutions and as a result is expected to reduce Bank profits overall.
Even so, Trading operations are still the major earners of many of these massive organizations.
The Big three all had an excellent quarter.
The Bank of America Trading Revenue grew by 14%. Overall its revenue was $21.63 billion vs. the estimated $20.97 billion. Currently its shares (NYSE:BAC) is at $16.47 up by +$0.21(+1.29%) today; this contrasts to the weekly opening price of $16.17 on Monday.
J.P. Morgan had an excellent 33% rise in last quarter’s profits compared to the same period in the previous year. They have a reported income of $24.7 Billion. Currently its shares (NYSE:JPM) are at $68.42 up +$0.72(+1.06%)
CitiGroup had a 8% increase in profit year to year. Its stock (NYSME:C) is currently at $49.54 up +$0.55(+1.13%) today. It is also up from this week’s opening price of $48.61 on Monday.
Overall these results shows that there is still significant strength in the financial sector and is excellent news for investors.
These results are in contrast to the dismal trading results of the previous year. This may explain why the year to year results seemed good in comparison. However in a year with so much financial uncertainty this is definitely a good sign to investors nonetheless.