Date: Tues, 21 January 2020
Author: Finance, finews.asia
On Tuesday, Europeans stocks finished higher and analysts were speculating over Trump administration. Concerns over its ability to push through pro-growth reforms in the world’s biggest economy.
Large numbers from American banks, all of which have gone beyond analysts’ predictions and few of which have been charged by a surge of inclination towards both wealth and asset management, has increased the pressure on lenders across the Atlantic to safeguard theirs.
Watch Out Julius Baer
American banks have developed revenue streams in 2019 – letting go traditional strongholds such as equities trading or mergers and acquisitions advisory. At Goldman Sachs, for example, the focus was on its newly carved out asset and wealth management business – assets under management had grown by an extraordinary 25 percent over the last year to $561 billion.
Although the sum may be not as significant in the context of the American bank, other businesses classify it as the same category as European players such as Julius Baer which had less than $500 billion in assets at the end of 2019.
Thanksgiving and Trade War Notwithstanding
The outperformance surpasses the overhang of trade tensions with China which dogged U.S lenders and their clients for most of the year. Also, the vague wondering of a presidential impeachment definitely stalled domestic politics.
“Typically, in the fourth quarter you see a deceleration after Thanksgiving, and we didn’t see that” said Morgan Stanley Chief Financial Officer Jonathan Pruzan as he disclosed substantial results supported by 125 percent growth in income from the bank’s fixed-income business. The blowout performance by the world’s largest stock-trading firm followed on the heels of similar growth at both J.P. Morgan and Goldman Sachs and the largest U.S bank by assets, J.P. Morgan had its most profitable year prior to the financial crisis.
Next Stop China
Adding to these woes is the deep war chest each of the three large U.S. banks – J.P. Morgan, Goldman Sachs, and Citi – bring to their goals for mainland China. In view of their signals from cooling trade tensions, each of the banks has restated its commitment to investing in Asia’s largest economy, adding to the pressure European banks are already facing in the region.
Some, like UBS which has licensed operations in both Beijing and Shanghai, have had their hopes pinned on a strong North Asian footprint for a few years now but have found it a tough market to crack. Their American peers have the upper hand of well-established investment banking franchises that have greater brand recognition amongst China’s newly minted millionaires.
Earn Their Keep
In a persistent low rate environment, European banks will have to rely on fees and not earnings from interest for growth. Whether they have the wherewithal to earn their keep will become evident when industry-leader UBS flags off fourth-quarter results season for European banks on January 21. Julius Baer and Credit Suisse follow suit in February.
The achievements and profits of American banks in areas such as asset management, bond trading, and wealth management – thus far, businesses that have been dominated by European banks outside of the domestic U.S market – set off worries of an eroding market share.
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