Successful investments, lower losses than estimates and operations of BUT, US banks aim for record profits
Part there banking season in the United States e JP Morgan, Bank of America, Goldman Sachs and Morgan Stanley, the most banks of Wall Street, aim to register Record profits for 2021 thanks to three key factors: successful investments, lower-than-estimated loan losses and successful mergers. A golden moment to be framed according to analysts who say that “it could take years to repeat such stellar gains”. To shed light on all this, an analysis by Financial Times which puts in line the latest results of the big American banks together with the market forecasts.
Assuming that the fourth quarter results have already been published by Citigroup and JPMorgan Chase, while I am still missing Goldman Sachs, Morgan Stanley and Bank of America, which will publish the data on January 18 and 19 respectively, analysts are already able to predict, according to the estimates compiled by Bloomberg and historical earnings data from S&P Capital IQ, which all except Citi will report the maximum annual profits still.
“It may take until 2024 before profits are higher than in 2021,” he said Matt O’Connor, head of large-cap banking research at Deutsche Bank. However, according to reports from the FT, the perspective of a Federal Reserve interest rate hike in 2022 fuels optimism that banks could be set for another strong year. “We expect bank stocks to continue to outperform the market in 2022,” he wrote Jason Goldberg, analyst of Barclays, in a note to customers this week.
But what helped fuel the earnings of American lenders? According to reports from the FT, profits were flattered by the release of reserves that banks had set aside to cover potential loan losses they feared might go bad during the pandemic. But so far they turned out to be much less frequent than feared. The analysts of Goldman estimate that the seven major banks they cover, including JPMorgan and Bank of America, they have now released $ 36 billion of the $ 50 they had initially allocated in anticipation of loan losses. The total profit is therefore 14 billion.
In this, to pay also the successful investment banking fees, with global mergers and acquisitions which in 2021 reached the highest levels since the beginning of the records. “People don’t believe that, especially commission-based capital market activities, these kinds of levels experienced in 2021 are necessarily normal,” he said. Devin Ryan, analyst of JMP Securities.
Now, after such a great year, gInvestors are wondering if 2021 was the “peak profit” for the big banks. Second Richard Ramsden, banking analyst at Goldman Sachs, “what investors are trying to understand is whether the market has overvalued or undervalued the rate option that was incorporated into the bank shares.”
That said, overall the market valuation is currently positive: US bank shares rose 35% in 2021, according to analysts at Deutsche Bank and from the first days of 2022 they are pushing upwards again.
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