THE TOP US investment banks defied gloomy market conditions to rack up big jumps in profits last year, fourth quarter results showed yesterday, as central bank support and a renewed focus on cost control breathed new life into the troubled sector.
A boom in debt underwriting alongside strong fixed income, currency and commodities client execution performance helped Goldman Sachs on the way to a 19 per cent rise in total net revenues in 2012.
Tight cost controls – the ratio of compensation to revenue fell to 37.9 per cent, its second lowest level ever – contributed to a 68 per cent leap in profits, which hit $7.48bn (£4.68bn).
“While economic conditions remained challenging for much of last year, the strengths of our business model and client franchise, coupled with our focus on disciplined management, delivered solid performance for our shareholders,” said chief executive Lloyd Blankfein.
JP Morgan also recorded record debt underwriting fees, as well as record assets under custody and a boom in commercial loans which expanded for the 10th consecutive quarter.
An improvement in consumer credit conditions pushed down loss allowances by $700m and gave the bank’s mortgage arm a boost – it originated 920,000 loans in the year.
Those successes propelled profits up 12 per cent to $31.28bn, its third consecutive year of record profits.
That comes despite the $6.2bn lost on bad derivatives trades made by the so-called London Whale.
Meanwhile custodian bank BNY Mellon saw profits slip on weak trading numbers, although it still racked up a strong rise in fee revenues as investors piled into the institution.