Profits surge at big US banks; Italy rules out strengthening ‘golden power’ rules on financial sector #ItalyFinance

The major US banks posted stellar results 2024 results on Wednesdayfuelled by robust trading and dealmaking activity, sending lenders’ shares higher.

Net income at JPMorgan, the country’s largest bank by assets, soared by 50 per cent year on year to over $14bn, far exceeding analyst forecasts.

“The US economy has been resilient,” said JPMorgan’s chief executive Jamie Dimon, citing low unemployment and healthy consumer spending. “Businesses are more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business.”

Meanwhile, Goldman Sachs doubled its fourth quarter profits to $4.1bn, while Citigroup rebounded with a $2.9bn profit, reversing a $1.8bn loss in the same quarter last year.

The sector’s performance was bolstered by a surge in equity trading around the US elections on November 5. Donald Trump’s victory prompted a market rally, with investors betting on his pro-growth policies. Bond markets also contributed, as companies capitalised on low borrowing costs to raise debt, while equity markets saw a wave of initial and secondary offerings to raise cash.

The results represent a turnaround from the challenges of early 2023, which weighed down earnings due to banks’ one-off contributions to the Federal Deposit Insurance Fund, which was depleted by the regional banking crisis a year ago.

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Italy has no plans to strengthen its “golden power” legislation for mergers and takeovers in the financial sectoreconomy minister Giancarlo Giorgetti confirmed on Wednesday.

Speculation in Italian media earlier in the week suggested that the Italian government might introduce a decree to expand its powers, particularly in response to UniCredit’s unsolicited bid for Banco BPM. Speaking to reporters in parliament, Giorgetti dismissed these rumours, stating, “There is no decree.”

The golden power rules, which were expanded during the Covid-19 pandemic to protect the country’s strategic assets, allow Rome to review transactions involving critical companies.

Giorgetti said that the government is awaiting UniCredit’s full disclosure of its takeover terms for Banco BPM before initiating a review under these rules. Prime Minister Giorgia Meloni’s government may seek assurances regarding bank branches to maintain customer services and protect jobs.

UniCredit’s move has disrupted plans for a Banco BPM merger with state-backed Monte dei Paschi di Siena, intended to form a third large Italian bank to rival UniCredit and Intesa Sanpaolo.

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Goldman Sachs’ credit card partnership with Apple could conclude before its 2030 contract end datechief executive David Solomon revealed during an earnings call on Wednesday.

“We have a contract with Apple to run that partnership until 2030, although there’s some possibility that it won’t continue until that time frame,” Solomon said.

The Apple Card has negatively impacted Goldman’s return on equity, reducing it by 75 to 100 basis points in 2024. However, Solomon projected improvement in 2025 and 2026. The partnership is managed under Goldman’s platform solutions unit, which reported an $859mn net loss for the year.

Goldman’s partnership with Apple began in 2019 and holds around $17bn in balances. The initiative was initially celebrated by Wall Street as a landmark move into retail banking. However, the bank has gradually retreated from its wider retail banking ambitions, following years of sustained losses in the sector.

According to a Reuters report on Wednesday citing sources familiar with the matter, Apple is in talks with Barclays and Synchrony Financial to potentially replace Goldman as its credit card partner. JPMorgan has also been in discussions with Apple about the business since last year, the Wall Street Journal previously reported.

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Spain’s antitrust watchdog, the CNMC, said on Wednesday that it did not see the relatively low number of banks in the country as a primary factor behind lower deposit returns compared to other eurozone countries.

The report follows BBVA’s hostile takeover bid for smaller lender Sabadell, which is currently subject to an extended in-depth review. The Spanish government had commissioned the CNMC to investigate whether a lack of competition in the banking sector was hindering lenders from offering higher interest rates on retail deposits.

Instead, the CNMC attributed the issue to barriers such as bank switching costs, limited financial literacy and insufficient access to alternative products. It recommended improved transparency, improving customer education and measures to ease bank switching.