One factor in the good recent performance of the nation's financial majors is the success of their investment banking arms. Among other things, these units have benefited from a robust IPO market and a rising (for the most part) stock exchange. So it follows that the classic motivational tool for investment bankers -- their bonuses -- saw a big rise last year.
The New York state comptroller's office released its annual figures for Wall Street's collective bonus pool, revealing that in 2013 the grand total popped by 15% to $26.7 billion. That number averages out to $164,530 per investment banker, a post-financial crisis high. The segment is doing just fine and should continue to roll merrily along.
One reason for this is that the IPO market remains strong, with the latest big-ticket issue being priced a few days ago. King Digital Entertainment, maker of hit mobile game Candy Crush Saga, stands to bring in as much as $533 million in the offering, and lead underwriters JPMorgan Chase (NYSE: JPM ) , Bank of America (NYSE: BAC ) Merrill Lynch, and Credit Suisse (NYSE: CS ) will all be paid handsomely for their work on the issue.
On the subject of well-compensated financiers, Stanley Fischer got a bit of a grilling on Capitol Hill this week. In his confirmation hearing to be the Federal Reserve's vice-chairman, the noted economist faced several tough questions about his three-year stint as a Citigroup (NYSE: C ) executive from Senator Elizabeth Warren, no great fan of big banks. Warren is concerned that his relationship with the bank might affect his judgement at the Fed. Fischer's good reputation and experience (as two-term governor of Israel's central bank, and earlier as chief economist at the World Bank) augur otherwise, and he shouldn't have much difficulty being confirmed for the Fed job.
Meanwhile, investment banking revenues and bonuses are not the only aspects of finance seeing a rise. Wells Fargo (NYSE: WFC ) is staring into the eyes of a good home buying season, according to its CFO Tim Sloan. In an appearance on CNBC Thursday, Sloan pointed out that the home affordability index "continues to be very attractive," and that in the spring there should be plenty of buying -- and hence mortgage origination for the country's top housing lender -- following a tough winter.
Recent developments in mortgage rates back up Sloan's opinion. Freddie Mac's latest weekly primary mortgage market survey show that the 30-year fixed rate stood at 4.37% this past Thursday. That was almost exactly the midpoint between to the year-to-date high of 4.53% and the low of 4.23%; in other words, rates haven't see-sawed much at all. Borrowers like that sort of predictability, and they're certainly happy to buy property when they can get money at under 5%.
Resolutely cheap money, rising bonuses, a big new IPO... developments in banking were generally positive this week. Let's see if and how the sector can build on this good momentum going forward into the warm months.
This bank is ready for a bountiful spring
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