Two of America’s largest financial institutions have reported strong fourth quarter results as part of the first earnings season of 2013.
Goldman Sachs and JP Morgan both beat analyst estimations on the way to recording sizeable profits for the final quarter of last year.
Goldman Sachs, the fifth largest US bank by assets, reported net incomes of $2.83 billion for the three-month period to December 2012. Profits at the New York based investment bank have almost tripled since the fourth quarter of 2011.
Net revenues were $9.24 billion in the last quarter of 2012, a 53 per cent increase on the same period in 2011. This was mainly due to a 63 per cent increase in investment banking activities and a 109 per cent improvement in the firms market making business.
Revenue in all of Goldman’s main banking activities experienced gains in the fourth quarter.
"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 chairman and chief executive Lloyd Blankfein.
The announcement comes just a day after the business decided not to delay UK bonuses to benefit from imminent changes in income tax. Goldman had discussed the possibility of postponing bonus payments in the UK until April this year, when the higher rate of income tax is to fall from 50 per cent to 45 per cent.
The firm appeared to abandon the proposal after wide spread criticism, with Mervyn King, the outgoing Governor of the Bank of England, calling the plan “depressing”.
Meanwhile, JP Morgan also enjoyed impressive results, with profits climbing to $5.7 billion in the forth quarter. This was a 53 per cent increase for the same period in 2011.
The largest bank in the US by assets saw revenues rise to $23.7 billion, from $21.5 billion in the fourth quarter of 2011. This was attributed to a strong performance in mortgage lending, while the investment arm of the bank produced increased profits in its underwriting business.
The results caught many Wall Street analysts off guard considering the substantial losses that JP Morgan had to incur during the first nine months of last year as a result of costly derivative trades. The bank had to realise losses totalling $6.2 billion last year after a London based trader, known as the ‘London Whale’, made sizeable wrong way bets on credit derivatives.
Chief executive Jamie Dimons has had his bonus slashed by 50 per cent, from $23 to $11.5 million, as a result of the management failure. "The firm's results reflected strong underlying performance across virtually all our businesses for the fourth quarter and the full year, with strong lending and deposit growth," Mr Dimon said in statement.
