Dealmakers drive up US bank profits

new York The investment bankers are back in the spotlight. Thanks to the global merger and acquisition boom, Wall Street dealmakers are bringing in record sums of money, helping to keep financial institutions’ profits soaring.

the Bank of America, the second largest bank in the country, reported earnings growth of 58 percent for the third quarter to $ 7.7 billion. In the Citigroup profits increased by 48 percent. The leaps in profit were similarly strong Wells Fargo and at Morgan Stanley.

“The economic recovery continues and our businesses are now seeing the organic growth we saw before the pandemic,” said CEO Brian Moynihan. Merger and acquisition advisory fees rose 65 percent to $ 654 million. At Morgan Stanley they have more than tripled to $ 1.3 billion.

Companies around the world are planning more strategic acquisitions and mergers than they have in a long time. The need for acquisitions from the technology sector is particularly high. During the pandemic, many companies realized how important new technologies and digital offers are and now urgently want to upgrade.

This trend comes at just the right time for Wall Street. At the beginning of the corona crisis, it was the securities traders who, thanks to lively activity, generated lavish profits, especially in bond trading. As expected, this phase is now subsiding and is being replaced by high demand in investment banking. The banks can also further reduce their risk provisioning, which further supports profits.

Citigroup released about $ 1.2 billion in loan loss provisions, which had a positive impact on earnings. “The recovery from the pandemic has boosted consumer and business confidence and leads to high customer activity,” said Citi chief Jane Fraser, who has been running the bank since March. The institute is struggling with rising costs even more than other institutes. Compared to the previous year, these increased by five percent. Also because after an expensive breakdown, Citigroup has to spend billions to rebuild internal data and compliance programs.

However, according to Fraser, the bank can score elsewhere. Citigroup gives its employees significantly more flexibility when they return to the office. Employees are allowed to work permanently from home two days a week. On the other days, however, they could also leave the office earlier, for example to pick up their children from school or bring them to sports.

This clearly sets Fraser apart from Goldman Sachs and JP Morgan, who have ordered their employees back into the banking towers of Wall Street much faster. Citi is currently getting regular calls from top bankers from other Wall Street houses who are willing to switch – that was not the case before the pandemic, as Fraser told Bloomberg Businessweek magazine. Fraser made it clear that this did not harm productivity. “It’s refreshing because you get rid of part of the old and anachronistic culture. That releases energy. “

The fight for talent continues

America’s largest bank, JP Morgan Chase, had already presented results on Wednesday and prepared investors for further rising costs. On the one hand, the fight for the best talent will continue, which is associated with increasing personnel expenses.

On the other hand, however, the bank must also arm itself against the increasing competition from tech companies and fintech start-ups, emphasized CEO Jamie Dimon. “That is why we will spend as much as necessary to keep up with everyone else in our field.”

Bank of America was able to keep its costs stable in the third quarter. America’s second largest financial institution also benefited from strong credit growth and was able to set itself apart from the competition. Net interest income rose ten percent to $ 11.1 billion in the third quarter. JP Morgan’s CFO Jeremy Barnum believes a turnaround is imminent. This can already be seen clearly at Bank of America.

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