Big banks are raking in cash
The end of 2024 was a great time for big banks. Goldman Sachs, Citigroup, BlackRock — a bunch of financial institutions posted their calendar fourth-quarter earnings Wednesday. And a lot of them exceeded investors’ already rosy expectations.
JPMorgan Chase and Wells Fargo, for example, both saw their net income soar 50%.
Several factors came together in the quarter that spelled good news. “There was a lot of market volatility, and banks traditionally do very well when markets are volatile,” said Karen Petrou, managing partner at Federal Financial Analytics.
Petrou said volatile markets make people trade, seek advice and look for other services. Much of that volatility was based on election uncertainty. But Petrou doesn’t expect that to end.
“Some of what the president-elect [Donald Trump] says may be just bluster, but bluster from the Oval Office really moves markets, and I think you will see a good deal of volatility,” Petrou said.
Also, the Federal Reserve has been cutting interest rates. Kent Belasco, who directs the commercial banking program at Marquette University, said that made companies that use these big banks more optimistic.
“If they were looking to grow or expand or whatever, they start looking at this as an opportune time to maybe borrow from a bank to do that,” said Belasco.
On top of that, Belasco said big banks also received more deposits after the Silicon Valley Bank collapse in 2023.
“People started moving their deposits out of regional banks and into the bigger banks,” said Belasco. “Mainly because of the size, and I think they felt more comfortable with that.”
Belasco is optimistic that the sector’s success will continue.
Sam Stovall, chief investment strategist at CFRA Research, said the positive effects extend well past the banks themselves. “The financial sector is, in a sense, the lifeblood of the economy. Good news for banks is good news for the overall economy.”
For one thing, commercial borrowers have more money to invest. “If there’s an increase in demand for loans, then there’s the expectation for economic growth, for improved output, etc.” Stovall said.
And, he added, that growth and increased output spells good news for employment too.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
