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Bank Earnings Reflect Continued Economic Uncertainty

Investment Bank Earnings Roundup

Investment banks reported earnings these past two weeks with mixed results.

  • Goldman Sachs – Goldman set the tone last week for the rest of the Street when it reported its second quarterly loss since 1999 and its first since the financial crisis. Goldman has been hit particularly hard by the new financial regulations concerning its once lucrative proprietary trading units and has struggled this past quarter with the lukewarm global economy.
  • Bank of America – BOA surrendered its title as the U.S.’s largest bank (by assets) to J.P. Morgan Chase last week; the bank reported $2.22 trillion in assets compared to J.P.’s $2.29 trillion. BOA claims to be focusing on whittling down its balance sheet and improving its fundamentals to become more profitable and a relatively smaller enterprise. It posted a $6.23 billion profit for the quarter.
  • J.P. Morgan Chase – J.P. Morgan reported a 4% loss this quarter, citing legal problems in its mortgage division and general malaise in its investment banking department as reasons for the poor results. The bank’s profits came in at $4.26 billion, down from the $4.4 billion it reported last year in the same quarter. Division-wise, J.P.’s private equity department announced a $542 million pretax loss, its mortgage division $900 million, and its investment banking division down 20% to $1.6 billion.
  • Morgan Stanley –  Morgan Stanley defied analysts’ speculations last week as its $2.15 billion profit reversed some of the negativity that last year’s $91 million loss had inspired. The news pushed MS’s stock nearly 40 points north from its low earlier this month.
  • Deutsche Bank – Deutsche Bank reported €777 million ($1.1 billion) in profit this quarter, up significantly from last year’s $1.2 billion loss. DB cited strong consumer banking activity as a particularly important reason for this quarter’s success amidst the problems they’ve encountered due to the European debt crisis.
  • UBS – UBS made headlines earlier this week in announcing its earnings: a $2.3 billion rogue trading scandal caused profits to plunge 39% this quarter to a relatively modest $1.2 billion. UBS commented that it would be scaling back its investment banking division and refocusing on its more consistently profitable wealth and asset management departments.
  • Lazard – Lazard reported a 24% increase in revenue for its M&A division Thursday, attracting attention for its status as one of the few institutions on the Street to see increased activity in that particular department. Overall, the boutique posted a 15% loss on net income, stemming mostly from the slowdowns in its capital markets advisory and private equity divisions.
  • Evercore – Evercore also posted gains in its M&A division Thursday, reporting a 38% increase in revenue from last year. The elite boutique’s shares jumped 21.3% after announcing an impressive 35% increase in profit for the quarter. Evercore cites its relatively small size and dedication to advisory as reasons for its resilience in this sluggish M&A season.
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