Banks Got Their Yearly Report Card This Week

The Bloomberg list of top investment banking earners is out, and JPMorgan Chase, Bank of America, and Citigroup are all in the top five. Who's no. 1? Meanwhile, Wells Fargo reaches a settlement in court.

Mar 7, 2014 at 7:00PM

Photo credit: AmbooWho?

For the big banks this week, it was report card time. No, not the much-anticipated stress test results from the Federal Reserve (although we will see these soon enough), but the annual Bloomberg rankings of the top investment banking operations. These matter to the banking majors because for all of them, IB activity is a perennial revenue generator.

So who won, placed, and showed? The overall no. 1 in terms of total fees was JPMorgan Chase (NYSE:JPM), which in 2013 reaped just under $3.9 billion in such monies, followed by Goldman Sachs (NYSE:GS) and Morgan Stanley. Those three banks, by the way, were the respective Nos. 1, 2, and 3 the previous year as well. Meanwhile, 2012's fourth and fifth place banks switched places, with Bank of America (NYSE:BAC) Merrill Lynch taking the former this year and Citigroup (NYSE:C) the latter.

Of the five, Bank of America Merrill Lynch saw the best year-over-year growth in fees, with its $3.5 billion representing an 11% climb on an annual basis. The sharpest decline was recorded by Citigroup, at 14%.

Ah, Citigroup. That's a bank that doesn't need any more bad news, following last week's revelation that fraud by a client in Mexico would shave its most recent quarterly and annual results by around $235 million. On top of that, earlier this week the company's CFO John Gerspach said first quarter equity and bond trading revenue would be lower by the high-mid teens in percentage terms.

At least Citi has company. JPMorgan Chase CEO Jamie Dimon admitted late last month that his firm's take from trading up to that point in the year was down by about 15% on a year-over-year basis. Perhaps the bank's position as the top IB fee earner isn't as secure as it would like.

Meanwhile, this week was Wells Fargo's (NYSE:WFC) turn in the legal spotlight -- since the financial crisis, it seems that no more than three working days can go by without one bank or another getting sued, investigated, or hammering out a settlement with unhappy lenders/investors/regulators. In Wells' case it, along with HSBC, has agreed with a court in Miami to pay refunds to what could amount to hundreds of thousands of borrowers over allegations the banks overcharged for so-called "forced place" insurance.

This comes close on the heels of similar settlements reached with JPMorgan Chase and Bank of America. No price tag has yet been put on the settlement, but as Wells has a ton of mortgages on the market, it likely won't be cheap.

And there are (theoretically) fewer paychecks floating around these days. This morning the Bureau of Labor Statistics released its unemployment figure for February, which came in at 6.7%, 0.1 percentage points higher than the January rate. That reduces the chances for an interest rate hike in the immediate future, as the Fed had previously set 6.5% as the minimum level for holding rates near 0%.

We're still hovering very close to that level of joblessness, so a rate increase is still an eventual possibility. If that occurs it would affect the operations of the various banking giants in different and myriad ways. And the 2014 Bloomberg league table might end up looking very different than the current edition.

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Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Bank of America, Goldman Sachs, and Wells Fargo, and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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