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What's going on?

JPMorgan Chase was all in on the latest trading craze this year: America’s biggest bank by assets reported better-than-expected quarterly results on Friday.

What does this mean?

2020, in case you hadn’t noticed, was a year of extremes – and that suited JPMorgan just fine. All the pandemic and election-fueled chaos drove a surge in investor activity and, in turn, record fees for the bank’s trading segment, while the sheer number of initial public offerings gave its investment banking business its own shot in the arm. JPMorgan also freed up money it had previously set aside in case US companies weren’t able to pay back their loans, which suggests it’s starting to feel better about their chances. Whether that’s down to the arrival of coronavirus vaccines or a new round of US government support, take your pick.

Why should I care?

Zooming in: Trapeze artists.

While US banks like JPMorgan seem increasingly confident in American borrowers, European banks probably shouldn’t rest on their laurels: the European Central Bank (ECB) warned on Friday that the pandemic’s not done with some of the region’s companies yet. The ECB reckons it’s only government support that’s holding them up, and they could come crashing down when the safety nets disappear.


The bigger picture: Bank with a vengeance.

Things are looking up for US banks: the interest rates at which they borrow money from the US Federal Reserve (the Fed) are expected to stay low, even as the rates they offer their customers creep up. In other words, banks are making more money while their borrowing costs stay the same. The Fed even thinks they’re strong enough to start buying back shares again. All that good news does come with a downside, mind you: investors met JPMorgan’s results – as well as those of rival Citigroup, whose profits also came in better than expected on Friday – with a shrug.

 

Originally posted as part of the Finimize daily email.

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