War clouds over the Middle East are roiling global financial markets, but Wall Street's big banks appear to be enjoying an unprecedented boom. Extreme market volatility stemming from the Iran war has lifted revenue in bond and stock trading to record levels.
According to the financial sector on the 15th, combined net profit for the first quarter at the three largest U.S. banks—JPMorgan Chase, Citigroup, and Wells Fargo—surpassed $25 billion (about 36.825 trillion won). The Financial Times (FT) said Wall Street banks posted record results by seizing on market turmoil sparked by geopolitical risk.
JPMorgan Chase, the world's biggest bank, alone posted $16.5 billion (about 24.3012 trillion won) in net profit in the first quarter. That is an earnings surprise exceeding market expectations by more than $1 billion (about 1.4727 trillion won). In particular, revenue in the institutional sector that buys and sells bonds and stocks reached $11.6 billion (about 17 trillion won), setting a record high.
For investment banks (IB), geopolitical shocks such as the Iran war and Venezuela's military operation are, paradoxically, a boon. When outlooks for oil prices and interest rates turn uncertain, transactions by clients seeking to hedge risk or capture short-term gains surge. Jeremy Barnum, JPMorgan chief financial officer (CFO), said, "There was no extreme panic in the market and liquidity was ample," adding, "This healthy volatility was the primary driver of results."
Citigroup, which had undergone years of restructuring, also benefited handsomely from the "war windfall." Citigroup's first-quarter net profit soared 42% from a year earlier to $5.8 billion (about 8.5422 trillion won), the highest in 10 years. On the 14th, Citigroup shares closed at $129.58, marking a record high since the financial crisis, FT reported. Citigroup chief executive officer (CEO) Jane Fraser emphasized that the results of rigorous business reorganization are beginning to show.
Wells Fargo, a powerhouse in retail finance, also performed well with $5.3 billion (about 7.8058 trillion won) in net profit. In particular, its loan book topped $1 trillion, achieving top-line growth. Market experts expect investment banks' "volatility revenue" structure to continue for the time being unless geopolitical risks abate.