Two of Wall Street’s best-performing banks are seeing contrasting fortunes this morning, after shares of Goldman Sachs (GS) rose about 3% in the wake of its fourth-quarter earnings, while JPMorgan Chase‘s (JPM) stock dropped close to 1%.
Goldman’s profits more than tripled over the year-ago period, and per share earnings of $5.60 were well ahead of analysts’ estimates $3.78. It’s also worth noting that while revenue rose in pretty much all the bank’s divisions, total compensation is down 11% from a year earlier. Changing times, indeed.
As for JPMorgan, today’s results were somewhat clouded by release of the report into the so-called London Whale losses. While JPMorgan’s profit rose 53%, to $1.39 a share and also beat estimates,which called for $1.16 a share, attention is focused on how it let those losses happen.
David Benoit has a good rundown of the London Whale report’s findings, but suffice it to say that the bank’s risk controls simply weren’t good enough — and compensation wasn’t incentivized enough — to avoid the disaster of a $6.2 billion loss. Oh, and Jamie Dimon’s pay was cut by 50%; don’t weep for him, though, as he still made $11.5 million last year.
I noted yesterday that JPMorgan’s stock is cheap compared to its rivals and that, combined with the strength of its business, means it’s probably as good a bet as any big bank. But there’s no doubting the London Whale fiasco has hurt the bank — as Christian Berthelsen writes:
Mr. Dimon’s reduced compensation is the latest fallout from an episode that has shaken the bank and its top executives. The trading losses in the Chief Investment Office, which invests the bank’s excess cash, tainted J.P. Morgan’s reputation as one of the industry’s best risk managers. Two federal regulators this week slapped the bank with enforcement orders citing lax risk management at the company, and half a dozen other regulatory or law-enforcement agencies are conducting inquiries into the trades, internal accounting and risk controls at the bank and the adequacy of its public disclosures, according to securities filings and people with knowledge of the probes.
