Magazine article American Banker

Brokerages' 1Q Numbers Promising for Bank Giants

Magazine article American Banker

Brokerages' 1Q Numbers Promising for Bank Giants

Article excerpt

A Piper Jaffray & Co. analyst said robust trading results reported by three investment banks last week may augur well for first-quarter earnings at JPMorgan Chase & Co. and some of its peers.

In research notes issued Monday and Friday, Andrew Collins said the effect of widely anticipated accounting charges could be softened by gains from trading at JPMorgan, Citigroup Inc., and Bank of America Corp.

Under the revised Financial Accounting Standard 123, implemented Jan. 1, companies must record a compensation expense for stock options on their income statements until they vest. JPMorgan Chase, Citi, and B of A have indicated they expect to take charges for the three months that end March 31.

The $1.3 trillion-asset B of A has said it expects the rule to affect earnings by a nickel for the first quarter and 4 cents for the year. Mr. Collins said the impact will probably be 9 cents for the quarter at the $1.5 trillion-asset Citi and 5 cents at the $1.2 trillion-asset JPM.

Lower earnings at all three companies could be "partially offset" by higher trading revenue, he wrote.

Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., and Bear Stearns & Cos. Inc. last week reported strong earnings for their fiscal first quarter. (Goldman's ended Feb. 24; the others' ended Feb. 28.) All three pointed to solid results from fixed-income, commodities, and currency trading and reported brisk activity in mergers and acquisitions.

Goldman Sachs said trading revenue rose 57% from a year earlier and 68% compared with the fourth quarter, to $6. …

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