Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C) were the latest Wall Street banks to disclose fourth quarter earnings, revealing profits bolstered by Donald Trump’s election victory and strengthening the outlook for a broker dealers-related exchange traded fund.
Goldman Sachs and Citigroup, along with the other big banks, all capitalized on the so-called Trump Bump following his election day win after a surge in trading activity helped bolster revenue at the trading desks.
Global markets and U.S. equities have pushed toward record highs since November on hopes that President-elect Trump would ease regulations, cut taxes and spend $1 trillion on infrastructure, which helped trigger a risk-on equity market frenzy.
Consequently, Goldman Sachs, whose traditional strength lies in trading activities, experienced revenue generated rise by 25% in the fourth quarter, reports Luc Olinga for AFP.
“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” Goldman chairman and CEO Lloyd Blankfein said in a statement.
Meanwhile, Citigroup saw revenue generated by its financial product trading surge 24% in the fourth quarter, supported by bonds, currencies, commodities, whose revenues were up 36%.
“Obviously, trading was much stronger than we have originally envisioned, which is unusual,” Citigroup chief financial officer John Gerspach said. “The environment remains good” as clients are reacting “to tax code and pro growth policies.”
The increased trading activity helped strengthen the iShares US Broker-Dealers & Securities Exchanges ETF (NYSEArca: IAI), which added 21.8% over the past three months.
IAI provides exposure to U.S. investment banks, discount brokerages and stock exchanges. Investment banking & brokerage makes up 71.8% of IAI’s holdings, followed by financial exchanges & data 26.6% and asset management & custody banks 1.5%. Top holdings include Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Charles Schwab (NYSE: SCHW), CME Group Inc Class A (NYSE: CME) and Intercontinental Exchange (NYSE: ICE).
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