JPMorgan Chase reported 37% revenue growth in its investment banking segment. Unlike Goldman Sachs, JPMorgan Chase & Co. (NYSE:JPM) was actually able to grow revenue in its asset management segment in the most recent quarter. JPMorgan Chase reported growth because its client assets were up by 10% year-over-year.
Comparatively speaking, Goldman Sachs reported a 4% year-over-year growth in assets under management. So the reputational loss that Goldman Sachs suffered through the 2008 market crash has had somewhat of an impact on its ability to attract clientele.
Long-term, I remain optimistic on JPMorgan Chase despite the $410 million settlement that is pending for its recent manipulation of the energy markets. The company’s diversified business portfolio helps to offset the losses from its investment related activities. However, because of the recent issues with the energy markets, earnings growth projections were pulled back, as litigation related expenses are expected to increase. Analysts on a consensus basis are anticipating the company to report flat earnings growth in the second half of 2013.
Wells Fargo & Co (NYSE:WFC) may be under greater pressure than both Goldman Sachs and JPMorgan Chase to grow earnings. Wells Fargo has a smaller set of tools to grow earnings. This is because Wells Fargo & Co (NYSE:WFC) isn’t much of an investment bank, but rather it’s primarily a consumer bank. The company’s primary growth catalysts come from falling loan loss allowances, and growth in cross-sales. Client deposits are up, but the company hasn’t increased the amount of lending by much.
Wells Fargo & Co (NYSE:WFC) reported flat revenue growth for the quarter. This was because the bank reported a 4% decline in net interest income, which was offset by a 4% improvement in non-interest income. The growth in financial services, paired with the company’s growth in lending could give it some upside. But it’s going to be the slowest growing bank of the major five banks on Wall Street (JPMorgan Chase, Citigroup, Bank of America Corp (NYSE:BAC), Wells Fargo, and Goldman Sachs).
Conclusion
I believe there’s a lot of potential in owning Goldman Sachs Group Inc (NYSE:GS). The lack of guidance is a little disturbing but understandable as no analysts predicted the ridiculous beat on earnings in the most recent quarter.
That being the case, investors should look to universal banks or investment banks for higher rates of return. If safety is a priority then Wells Fargo may be for you, as it is more predictable.
The article Goldman Sachs’ Earnings Were a Slam Dunk originally appeared on Fool.com and is written by Alexander Cho.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of JPMorgan Chase & Co (NYSE:JPM). and Wells Fargo. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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