The Big Dogs are Back Favorable economic conditions, strategic expense management, with revived investment banking activity enabled the major U.S. banks to deliver super-strong Q4 2024 earnings. EPS growth was driven by strong capital markets activity in debt & equity markets and increased corporate activity (M&A), while rising interest income came as the curve steepened which reduced borrowing costs. Subdued loan demand was apparent as JPM’s loan book rose a mere 1% while WFC’s loan book fell 3%. Technology advancement and AI tools have led to more efficient bank operations while prudent risk management and lower loss provisions proved accretive. The Big Dogs look solid as a rock as they head into 2025 with strong CET1 ratios, improving credit quality and the prospects for robust capital markets activity with growing asset management businesses. Banks are well-positioned to capitalize on further economic expansion, digital innovation, and highly favorable regulatory changes, which will serve to enhance shareholder value and market confidence. I have been bullish banks for the past year and I maintain this view.
Strong top-line revenue growth and more impressive earnings growth in Q4/24. For instance, Morgan Stanley and Goldman Sachs saw revenue growth of 14% each, while EPS soared 43% and 56%, respectively (y-o-y). JPM revenue was +11% as earnings soared +24% in Q4. Bank of America’s revenue, net of interest expense, was up by 15% year-over-year to $25.3 billion supported by a 44% increase in investment banking fees and +13% rise in sales and trading revenue. The backdrop of a resilient U.S. economy, with low unemployment and healthy consumer spending will continue to contribute positively to bank earnings.
Banks earnings growth accelerated faster than Big Tech (see chart below).
Congratulations to Jamie Dimon, Brian Moynihan, Jane Fraser, Charlie Scharf, David Solomon and James Gorman—all your hard work is paying off as your franchises have never been stronger and I hope you’re having a fantastic time in Davos, Switzerland. |