Profit at Goldman Sachs Group Inc jumped amid a merger boom, while JPMorgan Chase & Co’s results were boosted by the impact of the recovering US economy on loan quality, according to results released on Tuesday.
The financial heavyweights reported soaring second-quarter profit compared with the previous year, when large banks set aside massive reserves in case clients defaulted amid the COVID-19 downturn.
However, widespread access to COVID-19 vaccines and the accelerating reopening of the US economy have put those days in the rearview mirror.
Photo: Reuters
At JPMorgan, which has a significant retail operation in addition to investment banking, combined debit and credit card spending was up 45 percent from the previous year and more than one-fifth higher than in the pre-pandemic 2019’s second quarter, JPMorgan chief executive Jamie Dimon said.
He highlighted “exceptionally strong” consumer and business balance sheets.
However, the much sunnier outlook includes some continued question marks surrounding the course of the pandemic.
The rapid spread of the Delta variant of SARS-CoV-2 is one factor creating “elevated uncertainty” about the bank’s outlook for “a very robust recovery,” JPMorgan chief financial officer Jeremy Barnum said.
Goldman Sachs chief executive David Solomon also cited the pandemic as a potential source of economic trouble, noting this month’s tightening of restrictions in Hong Kong and Australia.
Vaccine coverage “is not consistent across communities and nations, including parts of the United States,” Solomon said on a conference call with analysts. “Widespread vaccine distribution and high vaccine rates are critical to open and thriving economies.”
The biggest US bank by assets, JPMorgan began the earnings season for the sector, reporting that profit more than doubled to US$11.9 billion in the second quarter, including a boost from US$3 billion that had been set aside as reserves.
JPMorgan had budgeted US$8.9 billion for bad loans in the second quarter last year, but it reported just US$734 million in charge-offs for defaults in the second quarter this year.
However, revenue for the period fell 8 percent to US$30.5 billion, as the bank’s trading business saw much less activity compared with the previous year.
Bank executives also expressed little optimism about loan growth, given the healthy state of US consumer finances following government stimulus programs.
Loan growth is going to be “a little bit of a slog through the rest of this year,” Barnum told reporters.
While “unusually high” pay rates for credit cards are “a healthy thing for consumers, it does create a bit of a headwind for our loan growth,” he said.
JPMorgan posted record global investment banking fees of US$3.6 billion in the second quarter, driven by heavy merger and acquisition activity.
At Goldman, profit came in at US$5.3 billion in the second quarter, compared with US$197 million the previous year, when results were dented not only by provisions for bad loans, but from elevated legal costs.
Revenue was US$15.4 billion, a 16 percent increase and the second-highest quarterly revenue in the firm’s history after the first three months of this year.
Goldman’s results reflected a jump in financial advisory revenue due to a rise in completed mergers and acquisitions.
ELECTRONICS BOOST: A predicted surge in exports would likely be driven by ICT products, exports of which have soared 84.7 percent from a year earlier, DBS said DBS Bank Ltd (星展銀行) yesterday raised its GDP growth forecast for Taiwan this year to 4 percent from 3 percent, citing robust demand for artificial intelligence (AI)-related exports and accelerated shipment activity, which are expected to offset potential headwinds from US tariffs. “Our GDP growth forecast for 2025 is revised up to 4 percent from 3 percent to reflect front-loaded exports and strong AI demand,” Singapore-based DBS senior economist Ma Tieying (馬鐵英) said in an online briefing. Taiwan’s second-quarter performance beat expectations, with GDP growth likely surpassing 5 percent, driven by a 34.1 percent year-on-year increase in exports, Ma said, citing government
‘REMARKABLE SHOWING’: The economy likely grew 5 percent in the first half of the year, although it would likely taper off significantly, TIER economist Gordon Sun said The Taiwan Institute of Economic Research (TIER) yesterday raised Taiwan’s GDP growth forecast for this year to 3.02 percent, citing robust export-driven expansion in the first half that is likely to give way to a notable slowdown later in the year as the front-loading of global shipments fades. The revised projection marks an upward adjustment of 0.11 percentage points from April’s estimate, driven by a surge in exports and corporate inventory buildup ahead of possible US tariff hikes, TIER economist Gordon Sun (孫明德) told a news conference in Taipei. Taiwan’s economy likely grew more than 5 percent in the first six months
SMART MANUFACTURING: The company aims to have its production close to the market end, but attracting investment is still a challenge, the firm’s president said Delta Electronics Inc (台達電) yesterday said its long-term global production plan would stay unchanged amid geopolitical and tariff policy uncertainties, citing its diversified global deployment. With operations in Taiwan, Thailand, China, India, Europe and the US, Delta follows a “produce at the market end” strategy and bases its production on customer demand, with major site plans unchanged, Delta president Simon Chang (張訓海) said on the sidelines of a company event yesterday. Thailand would remain Delta’s second headquarters, as stated in its first-quarter earnings conference, with its plant there adopting a full smart manufacturing system, Chang said. Thailand is the firm’s second-largest overseas
SUPPLY RESILIENCE: The extra expense would be worth it, as the US firm is diversifying chip sourcing to avert disruptions similar to the one during the pandemic, the CEO said Advanced Micro Devices Inc (AMD) chief executive officer Lisa Su (蘇姿丰) on Wednesday said that the chips her company gets from supplier Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) would cost more when they are produced in TSMC’s Arizona facilities. Compared with similar parts from factories in Taiwan, the US chips would be “more than 5 percent, but less than 20 percent” in terms of higher costs, she said at an artificial intelligence (AI) event in Washington. AMD expects its first chips from TSMC’s Arizona facilities by the end of the year, Su said. The extra expense is worth it, because the company is
RSS