By Geoffrey Smith and Dhirendra Tripathi
Investing.com - Wall Street's biggest banks set a blistering start to the first-quarter earnings season, with both JPMorgan and Goldman Sachs thriving against a backdrop of extraordinarily buoyant capital markets.
Goldman Sachs (NYSE:GS) reported record revenue and earnings for the quarter, with equities markets revenue in particular rising over 68% from a year ago.
JPMorgan (NYSE:JPM) also reported earnings per share nearly 50% ahead of expectations for the three months through March - albeit thanks largely to one-off factors and extraordinary conditions in capital markets.
Revenue was nearly 10% ahead of expectations at $33.12 billion, but the bank's cost-income ratio ticked higher to 58% from 55% in the final quarter of 2020.
Goldman stock rose 1.8% in premarket trading by 8:10 AM ET (1210 GMT), while JPMorgan stock fell 0.6%, reflecting disappointment at the comparatively soft performance of its Main Street lending operations.
JPMorgan's numbers were juiced by the release of some $5.2 billion in reserves against possible loan losses that the bank had built at the start of the pandemic. The bank made $1.1 billion of fresh write-offs in the quarter.
CEO Jamie Dimon said in a statement that the bank's remaining credit reserves of $26 billion "are appropriate and prudent, all things considered,” and stressed that the release of previous reserves should not be regarded as a recurring factor.
The corporate and investment bank arm flourished, as expected, against a backdrop of buoyant financial markets and a boom in the formation of Special Purpose Acquisition Companies. Overall revenue at the division was up 46% from a year earlier at $14.6 billion. Equity markets revenue was up 47% at $3.3 billion, while fixed-income revenue was up 15% at $5.8 billion.
Investment banking revenue was $2.9 billion, up $2 billion, as investment banking fees rose 57%.
The consumer bank, by contrast, put in a weaker performance, with home lending stagnating on the quarter and modest declines in consumer and auto loans, against a backdrop of steadily rising interest rates.
JPMorgan shares are up 21% from the beginning of the year, still down 4.69% from its 52 week high of $161.68 set on March 18. They are outperforming the S&P Global 100 which is up 8.82% from the start of the year.
Wells Fargo (NYSE:WFC) and Goldman Sachs (NYSE:GS) are also set to report before the opening bell.
Stay up-to-date on all of the upcoming earnings reports by visiting Investing.com's earnings calendar