Goldman Sachs and JP Morgan: Economic Recovery Will Continue
JPMorgan Chase & Co. (NYSE:JPM) Chief Executive Officer Jamie Dimon and Goldman Sachs Group Inc. (NYSE:GS) CEO Lloyd C. Blankfein expect Wall Street will bounce back from 2011’s trading-revenue drop. However, rivals and analysts don’t think so.
Four of the six biggest U.S. banks’ fourth-quarter earnings show the industry most likely had its third quarterly drop. Executives and analysts are trying to determine if harsher regulations, capital rules and a weak economy might accentuate a decline in revenue after the European debt crisis restricted trading volume and corporate deal making in the latter part of 2011.
Credit Suisse Group AG (NYSE:CS), UBS AG (NYSE:UBS) and Royal Bank of Scotland Group Plc (NYSE:RBS), all of which are decreasing their investment banks, have declared plans to cut about 8,300 jobs. Citigroup (NYSE:C) reduced employees’ 2011 compensation.
“The world will snap back, and it will be a surprise, and it will be faster than people think,” Blankfein said. Yesterday, Goldman Sachs CFO David Viniar reiterated the statement that the firm’s trading revenue fell 25 percent from the third quarter to $3.06 billion. “We are clearly in a cyclical downturn,” rather than a secular decline, Viniar said. “There is less activity that is cyclical. That will come back. I have no idea when, but it will come back.”