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US financial giants announce large rises in investment baking profits.
Goldman Sachs (NYSE:GS) has repored a profit of $2.9bn in fourth quarter of 2012, a threefold rise on 2011, whilst JP Morgan (NYSE:JPM) saw a 54% profit increase to $5.7bn over the same period.
Global markets responded positively to Goldman Sachs profits with its stock price rising by 2.6% in early trading to 139.15, but conversely JP Morgan saw a fall by 1.4% to 45.73.
Commenting on their results Goldman Sachs’ chairman and chief executive Lloyd Blankein said that 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”.
Goldman Sachs also announced that 6,000 employees in the UK will be receiving bonus, worth £8.1bn in total – an average of £250,000 each. The bank was forced to back down from its original plans to defer bonus payments until the new financial year, to benefit from the planned cut in income tax from 50p to 45p, following criticism from Sir Mervyn King, Governor of the Bank of England.
News of JP Morgan’s profit follows the US Federal Reserve and the Office of the Comptroller public reporting that they must tighten up its risk controls and management after London-based trader Bruno Iksil, known as London Whale, lost the bank billions of dollars.
Stating that it “has been working hard to fully remediate the issues”, JP Morgan’s board is required to agree to and publish plans on how it will reform its operations.
In response to the report and accusations of the bank violating US sanctions by processing wire transfers with Iran, Jamie Dimon, chief executive of JP Morgan, will see his annual bonus halved to $10m.
