JPMorgan, BofA Chiefs Forecast Fourth-Quarter Trading Gains

Updated on
  • U.S. election spurs rethinking on interest rates, growth
  • Dimon sees trading revenue up at least 15% this quarter

JPMorgan Chase & Co. and Bank of America Corp., the two biggest U.S. banks, forecast fourth-quarter trading gains after the U.S. election roiled markets and upended expectations for interest rates and economic growth.

Trading revenue is up at least 15 percent at JPMorgan compared with the same period last year, Chief Executive Officer Jamie Dimon said Tuesday at a conference in New York. Brian Moynihan, CEO at Bank of America, said at the same event that fixed-income sales and trading revenue at his company is up about 15 percent. He didn’t provide an overall trading figure.

The surprise victory of President-elect Donald Trump raised expectations for lower corporate taxes, higher interest rates and the possibility that bank regulations that have kept a lid on dividends could be eased. In combination with gains posted earlier in the year, global investment banks are on pace for their first annual bond-trading revenue increase in four years.

“It’s about 15 percent-plus -- a little bit over that -- year-over-year, which is obviously much better,” Dimon, 60, said of trading at the conference, adding that bank stocks have been surging since the election on the hope that Trump’s policies will “unleash business” and boost the economy, which will spur lending.

See also: New credit card eats into profits

In October, New York-based JPMorgan said it assumed that trading revenue would be unchanged from the previous year. The firm has benefited from higher pricing in rates trading, which includes government bonds, because it’s a capital-intensive business that some competitors are leaving, Dimon said Tuesday. JPMorgan is keeping its share of the fixed-income market as more of it migrates to electronic platforms, Dimon said.

Bank Headwinds

Investment-banking revenue at Bank of America is “solid but it’s not up to what it was last year,” said Moynihan, 57. The Charlotte, North Carolina-based firm expected to generate between $1 billion to $1.2 billion in fees from that part of its business this quarter, the CEO said. That would compare with about $1.3 billion in the fourth quarter of last year, excluding self-led deals, according to Bloomberg Intelligence data.

Moynihan said most of the investment-banking activity has been coming from debt-capital markets, where the bank helps companies arrange new borrowings.

Dimon said profit at his firm would be hurt by JPMorgan’s new Sapphire Reserve credit card, which is cutting as much as $300 million from fourth-quarter earnings because its unexpected popularity resulted in high cardholder-reward costs.

On the topic of regulation, it makes sense for elected officials and regulators to revisit Dodd-Frank rules governing the financial industry because they were primarily crafted by Democrats, Dimon said.

“We’re not asking for wholesale throwing out of Dodd-Frank,” Dimon said. “It’s always been rational to look at major legislation and, you know, open it up, take a look at it, re-calibrate it, change it a little bit.”

Volcker Revisited

The Volcker Rule that bars banks from making bets with their own money could be changed to help firms make markets with greater ease, potentially improving liquidity, Dimon said.

The JPMorgan CEO, who was said to be considered by the Trump administration as the next Treasury secretary before Steven Mnuchin was named, said that he wants to help boost growth by joining a group of corporate leaders who will advise Trump on economic matters. Blackstone Group LP co-founder Stephen Schwarzman is chairman of the group.

“I am a patriot, and I want to help my country and I want to help them grow. I want to help the lower-waged people -- I probably want to help them more than I want to help you, I’ll put it that way,” Dimon told the crowd. “I think I might be able to do a better job from the outside than doing it from the inside.”

— With assistance by Jennifer Surane, and Jordyn Holman

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