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NEW YORK (Reuters) -Wall Street CEOs voiced confidence on Wednesday that the incoming U.S. administration would be business-friendly and good for banks as they reported a profits surge after dealmaking and trading picked up.
The market environment has already been favorable for banks, with buoyant equity markets and anticipation that President-elect Donald Trump will usher in a deregulatory and lower-tax agenda.
"There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election," Goldman Sachs CEO David Solomon told analysts on an earnings call. "Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking, supported by an improving regulatory backdrop."
Shares among the banks that reported earnings on Wednesday rose solidly, with Goldman Sachs climbing 5.6%, JPMorgan Chase up 2%, Wells Fargo gaining 5.9% and Citi up 7.5%. Bank of America and Morgan Stanley will report results on Thursday.
"Animal spirits are back," said Stephen Biggar, banking analyst at Argus Research, referring to the tendency for investors' emotions to drive stock prices. "There are good times to be over-exposed to capital markets revenues, and this is one of them."
Equity markets have surged over the past year, with the S&P 500 climbing 23.3% in 2024, while deal volumes have risen and strong demand for bond underwriting boosted investment-banking fees. Since the November U.S. election, the KBW Banking index is up nearly 10%.
Goldman Sachs recorded its biggest quarterly profit since the third quarter of 2021, at $4.11 billion, helped by deal fees, debt sales and trading. Its fourth-quarter global banking and markets revenues rose 33.4% year-over-year and the bank posted record net annual revenues in equities.
The bank said in a statement its prospects for investment-banking fees were greater in December than they were in September, offering an optimistic outlook for the coming months.
JPMorgan Chase posted a roughly 50% rise in net income as both investment-banking fees and trading revenues jumped in the last quarter, with CEO Jamie Dimon hopeful of more favorable conditions to come.
The earnings reports come days before the presidential inauguration, with Trump promoting an agenda of deregulation and lower taxes. Lighter regulation could spark an uptick in dealmaking, boosting banks' fee revenues.
"Businesses are more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business," Dimon said in a statement.