ANN/THE STRAITS TIMES – The six giants of United States (US) banking will see their first trillion-dollar decade. This is not USD1 trillion of total revenue; it is pure profit.
Such a haul did not seem possible before the decade began, when Wall Street was the target of a global protest movement and politicians at both ends of the spectrum were seething over bailouts or aiming to break up too-big-to-fail lenders.
The banks swelled instead, outpacing corporate America so handily that JPMorgan Chase, Bank of America and even hobbled Wells Fargo are on track to make more profit over those 10 years than all but a few publicly traded US companies, according to data compiled by Bloomberg.
Citigroup, Goldman Sachs and Morgan Stanley are not far behind – and together, the six are poised to make even more next year.
While much of the world’s attention was focused on the riches minted by Silicon Valley, banks were gaining momentum. There is more than one reason for the feat: volatility juiced Wall Street’s trading hauls, investment bankers rode a dealmaking boom, and then US President Donald Trump boosted bottom lines by slashing taxes. Likewise, there is more than one reaction across the industry to the milestone.
It is not just the scale of profit that is so startling, though, but the industry’s ability to push through scandals and thrive anew.
To get out of the shadow of the global crisis, the banks had to pay. In 2014, Bank of America agreed to a record-breaking USD16.7 billion settlement to end probes into shoddy mortgage practices, passing JPMorgan’s USD13 billion. By then, some banks were mining new veins of profit that got them into trouble.
Employees inside Wells Fargo, under pressure to meet sales targets, set up millions of accounts for customers who had not asked for them, the most famous in a series of scandals that ultimately spanned most of its businesses. In Malaysia, Goldman Sachs finished raising billions of dollars in 2013 for a state-owned investment fund known as 1Malaysia Development Berhad, which was then pilfered by a group including a former prime minister.
The magnitude of profit makes those mistakes look like hiccups. One person whom the industry can thank, Trump, taunted banks on the campaign trail before putting two Goldman alumni in charge of a tax overhaul that helped transform corporate profits. Banks that had been used to paying three in 10 dollars to the government found themselves forking over less than one in five for 2018. Their tax bills went down from there.