Bond Of Brothers

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What's going on?

Bank of America (BoA) and Goldman Sachs reported fourth-quarter results on Wednesday – and both had their bond trading businesses to thank for rising revenues.

What does this mean?

BoA’s deal-making and advisory business made more money than expected last quarter. And its “FICC” trading segment – fixed income (bonds etc.), currencies, and commodities – did well too, making 25% more than a year ago and nudging the bank’s profit past analysts’ predictions. It wasn’t all good news, mind you: the interest income BoA earned on loans fell as last year’s three US interest rate cuts hit home.

Goldman Sachs’ story was similar: last quarter’s revenue from the bank’s bond trading business was 63% higher than the year before, helping its total revenue exceed expectations. But the bank’s profit fell short, no thanks to the more-than $1 billion it spent fighting a variety of legal battles.

Why should I care?

For markets: United they fall.

JPMorgan set a high bar for rivals on Tuesday, reporting the most profitable year for any US bank ever. But between falling interest income and expensive legal troubles, neither BoA nor Goldman came close to matching up (tweet this). Investors duly sold both stocks, which initially fell by 2% – though that may be just a drop in the ocean if US rates fall further this year. And British banks may soon find themselves in the same boat: investors think there’s a 60% chance UK rates will be lowered this month.

Zooming out: Looking for greener pastures.

The world’s biggest investment manager BlackRock announced better-than-expected quarterly results on Wednesday, while also revealing plans to make sustainability a more important part of its investment strategy. That’ll involve offering sustainable versions of BlackRock’s current funds – some of which you may be invested in via your broker, robo-advisor, or pension manager. Your wide array of investment choices just got wider…

Originally posted as part of the Finimize daily email.

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