As 2020 results start coming in, who in the US dealt the best with Covid-19?
The COVID-19 pandemic was set to adversely affect results from companies in every sector, but how did some in the financial sector fare? Patrick Brusnahan looks at banks in the US and their luck in the past year during unprecedented events
ank results are arriving from the US, but what are the highlights? Who fared well and who stumbled?
Net income falls slightly for Charles Schwab in 2020
The 2020 results for Charles Schwab are out and it reported net income of $3.3bn for the year, an 11% drop from the $3.7bn in 2019.
For Q4 2020, net income totalled $1.1bn, compared with $698m in the previous quarter and $852m year-on-year.
However, Net revenue for Charles Schwab in Q4 2020 was $4.176bn, a 60% rise year-on-year from the $2.606bn in Q4 2019.
Charles Schwab results for 2020 include TD Ameritrade from closing on October 6 2020 forward.
CEO Walt Bettinger said: “Producing record operating performance and closing the largest brokerage acquisition in history during the fourth quarter of 2020 was an extraordinary capstone to an extraordinary year. Schwab’s unrelenting commitment to seeing through clients’ eyes helped us not only stand tall throughout the events of the past twelve months, but also enabled us to enter 2021 larger, stronger, and more capable of serving clients than ever.”
“The impact of COVID-19, along with social and political turmoil, created an unprecedented combination of personal and macroeconomic challenges for our clients, employees and stockholders alike,” Bettinger continued.
Bank of America sees net income drop a third in 2020
Bank of America reported a net income of $17.9bn in 2020, a 34% drop from the $27.4bn earned in 2019.
Furthermore, net income for Q4 2020 also fell, from $7bn to $5.5bn year-on-year.
In addition, Q4 2020 revenue decreased 10% year-on-year.
However, Bank of America saw deposits grow by £327bn, or 23%, to $1.7trn.
Bank of America and wealth management in 2020
The global wealth and investment management arms of Bank of American fared better in the year.
Net income totalled $836m and there were record client balances of more than $3.3trn. Client balances increased 10% and was attributed to higher market valuations and client flows.
Deposits were up 20% to hit $306bn and Merrill added close to 22,000 net new households in 220. The private bank gained a net of 1,800 new relationships.
77% of wealth management clients used online or mobile platforms and there were a record 137,000 WebEx meetings hosted by Merrill Lynch Wealth Management Financial Advisors. This was an eightfold increased compared to Q4 2019. The private banks also managed a startling 1,800 client interactions per day in 2020.
Goldman Sachs profit jumps in Q4 2020 on trading boom
Goldman Sachs posted a 153% year-on-year surge in Q4 2020 net earnings, with growth across all business units mainly Global Markets and Investment Banking.
The investment bank’s net earnings applicable to common shareholders for the quarter to December 2020 was $4.36bn, compared with $1.72bn in the prior year.
Total net revenues in Q4 2020 were $11.74bn, up 18% from $9.95bn in Q4 2019.
Net interest income soared 32% to $1.41bn from $1.06bn. Provision for credit losses dropped to $293m from $336m a year earlier and $278m in the previous quarter.
The asset management unit generated $3.21bn in revenue, a 7% rise from a year ago.
The rise was driven by higher net revenues in Lending and debt investments, which was offset by slightly lower net revenues in Equity investments.
Net revenues in Global Markets surged 23% to $4.27bn on a year-on-year basis. Net revenues in Equities jumped 40% to $2.39bn while net revenues in FICC increased 6% to $1.88bn.
Wealth management highlights
Wealth management revenues of $1.31bn in the October-December quarter was 11% higher than a year ago. This was attributed to higher management and other fees.
Net revenues in Private banking and lending remained were higher, due to net interest income on mortgages.
Overall, net revenues in the Consumer & Wealth Management division increased 17% year-on-year to $1.65bn.
Wells Fargo wealth unit reports rise in Q4 income
The wealth and investment management (WIM) arm of Wells Fargo has shown resilience in a challenging market, reporting a 157% year-on-year surge in Q4 2020 net income.
Overall, the group recorded a mixed performance, with net income rising 4%, although revenue fell 10%.
The unit’s net income for the quarter to December 2020 stood at $548m, versus $213m in the same quarter of 2019.
However, total revenue at the division dropped 4% to $3.79bn from $3.96bn over the period. The fall was attributed to lower net interest income due to lower interest rates.
Lower operating losses along with lower deferred compensation plan expense led to a 17% slump in noninterest expense from $3.05bn from $3.67bn. Net interest income decreased 19% year-on-year to $715m.
Total client assets grew 6% to $2trn, due to higher market valuations.
The total number of financial and wealth advisers at the end of Q4 2020 was 13,513, compared with 14,414 in the prior year and 13,793 in the previous quarter.
At a group level, the San Francisco-based lender’s net income increased to $2.99bn from $2.87bn. Total revenue however, decreased to $17.92bn from $19.86bn.
The lender, which has been embroiled in a major sales practices scandal for creating accounts on behalf of Wells Fargo clients without their consent, incurred customer remediation expenses of $321m in Q4 2020. This quarter also included restructuring charges of $781m.
Citigroup sees sharp falls in net income in 2020
Citigroup made a net income of $11,370m in 2020, a 41% drop from the $19,401m in 2019.
In terms of the bank’s Q4 2020, it saw net income of $4,632m, a 7% drop year-on-year. However, it was a 47% rise from Q3 2020.
Revenues for the group totalled $16.5bn in the quarter. They had decreased 10% year-on-year due to lower revenues in global Consumer Banking (GCB), Institutional Clients Group (ICG), and corporate/other.
Citi Private Bank saw $894m revenue in Q4 2020, a 6% growth from the $847m in Q4 2019. Furthermore, the year reported revenues of $3,737m, 8% up from the $3,460m in 2019. This was driven by “strong client engagement” as well as improved managed investments revenues and higher lending.
JPMorgan wealth unit profit slips in Q4 2020
JPMorgan’s asset and wealth management (AWM) unit has reported a drop in net income in Q4 2020 though revenues at the unit saw a rise.
Meanwhile, the group has reported a 42% growth in Q4 2020 profit, exceeding forecast, as it released money earlier put aside for bad loans.
Net income at the AWM unit was $786m in the October-December quarter, down 2% from $801m in the prior year.
Revenue of $3.87bn was 10% higher than the previous year, with Asset Management contributing $2.21bn and Wealth Management contributing $1.66bn.
Higher legal expense as well as volume- and revenue-related expense resulted in a 13% rise in expense to $2.8bn.
AUM increased 17% to $2.7trn and client assets increased 18% to $3.7trn, aided by inflows into liquidity and long-term products.
The quarter saw net inflows of $33bn into long-term products and outflows of $36bn from liquidity products.
BlackRock Q4 2020 profit soars as AUM hits record high
BlackRock Q4 2020 results surpassed estimates as AUM reached a record $8.68trn from $7.43trn in the prior year, amid improving global growth prospects and increased market activity.
Investors poured money into the asset manager’s funds through election uncertainty and launch of multiple Covid-19 vaccines. Money flowed into its ETFs, equity, fixed income and alternatives.
Q4 2020 highlights
The asset manager’s total net inflows through the quarter were $126.93bn, versus $128.84bn in the prior year.
The firm’s net income was $1.55bn in the three-month-period ending 31 December 2020, up 19% from $1.3bn in the same quarter of 2019.
Revenue increased 13% to $4.48bn from $3.98bn during the period.
Investment advisory, administration fees and securities lending revenue became its biggest revenue driver, contributing $3.39bn. A year ago, the figure was $3.09bn.
Technology services contributed $305bn to the revenue, increasing from $274m a year earlier.