Goldman Sachs' bankers and traders deserve the big pay increase that appears to be coming their way after the first quarter.
JPMorgan also reported its first quarter results today, and the rival U.S. bank underperformed Goldman in terms of revenue growth in every major banking and trading business area.
The chart below shows the two banks' comparative revenues in fixed income sales and trading, equities sales and trading, M&A advisory, equity capital markets and debt capital markets in the first quarter. Revenues rose faster at Goldman Sachs across the board.
Goldman Sachs' superior revenue growth in FICC (fixed income currencies and commodities trading) and equities (equities sales and trading) came even though the bank held its value at risk (VaR) flat. By comparison, trading value at risk jumped 77% in the first quarter at JPMorgan, driven by higher risk-taking in the commodities business. Like Goldman Sachs, JPMorgan said today that FX trading had a weak quarter and that securitized products and credit did well. Unlike Goldman Sachs, JPMorgan said it also had a weak quarter in rates and emerging markets.
In the first quarter of 2021, the equity capital markets (ECM) businesses of Goldman and JPMorgan generated roughly equivalent revenues. However, following the 315% year-on-year growth in ECM revenues at Goldman Sachs, driven by special purpose acquisition (SPAC) companies, Goldman generated $1.6bn of ECM revenues in Q1, versus $1.1bn at JPMorgan.
Bonuses are set to rise at both banks. JPMorgan hiked compensation spending in its corporate and investment bank by 44% compared to the previous year. However, this too looked a bit feeble compared to the 87% increase at Goldman Sachs.
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