Counterparties: Like water for profit
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In the unlikely event that you were harboring deep anxiety about the profitability of Goldman Sachs or JP Morgan, you can skip the Xanax. At the big banks, profits are very much back.
The new Goldman Sachs, Stephen Gandel writes, looks â€śa little bit like the old Goldman Sachsâ€ť. Goldman today reported that its fourth quarter profit rose 53% and full year earnings jumped 70%. The bank also pulled $6 billion in revenue from its own investments for the year, or 17% of its overall revenue. Goldman even found time to placate the rival — and overlapping — factions of employees and shareholders by cutting the amount of revenue going to employees, reports Lauren LaCapra. At 38%, Goldmanâ€™s compensation ratio is second lowest since the bank went public. Still, in absolute dollars, bank employees got a bump: comp rose 6% over last year.
Things were even better at JP Morgan: the bank set fourth quarter and full year profit records, an increase of 54% over last last yearâ€™s fourth quarter and 12% over 2011â€™s full year results. Despite the break-out profits, CEO Jamie Dimon was forced to accept just a $10 million bonus in penance for the botched trades in the bankâ€™s Chief Investment Office.
While Wells Fargo enjoys the fruits of the mortgage market, John Carney points out that Goldman and JP Morgan are doing much the same in the corporate bond market. Fixed income underwriting fees for the year Â were up 25% at Goldman and 79% at JP Morgan. Corporate America is apparently following Lloyd Blankfeinâ€™s sage advice to borrow at low rates, he notes.
There was one year-end review that wasnâ€™t as glowing: JP Morganâ€™s internal report on theÂ dissecting of Bruno Iksil. As Felix notes, the report doesnâ€™t tell us much about how the CIO officeâ€™s losses ballooned into the billions. Also troubling, says Matt Levine, is the fact that no senior manager was getting anything but heavily massaged data; even if that information was accurate, it wouldnâ€™t necessarily help them understand the CIOâ€™s dizzying synthetic credit positions. — Ben Walsh
On to todayâ€™s links:
Germany is taking back $36 billion in gold from foreign vaults – Bloomberg
Germany’s gold move could be a purely domestic move — or it could be much worse – Mohamed El-Erian
Let’s not canonize Mario Draghi just yet – Economist