Today is the day of Bank of America’s fourth quarter results. Coming fast on the tail of JPMorgan’s fourth quarter results, they invite some comparing and contrasting. It looks like JPMorgan comes off worse. Here’s why.
1. Bank of America hasn’t hammered down risk-taking like JPMorgan has
As we noted yesterday, JPMorgan has become very risk averse. Value at Risk (VaR) across the bank fell by 51% in JPMorgan’s corporate and investment bank last year compared to 2012. This doesn’t seem to have been replicated at Bank of America Merrill Lynch, where VaR fell ‘only 26%’ year-on-year in the markets business in the final quarter.
2. Bank of America’s global markets business had an excellent fourth quarter
Excluding the effects of pesky Debt Valuation Adjustments (DVA) and a UK tax charge, in the fourth quarter of 2013 the global markets business at BofA made a profit of $341m compared to a loss of $14m in the fourth quarter of 2012.
JPMorgan doesn’t split out the profits of its markets business, but revenues across markets and investor services at JPM fell 33% year-on-year in the final quarter and may well have impacted profitability.
3. Bank of America’s investment bankers had a very good year in 2013
Everyone had a good time at Bank of America in 2013: the M&A bankers, the debt capital markets (DCM) bankers, the equity capital markets (ECM) bankers.
In M&A, BofA revenues rose 7% versus 2012. In DCM, revenues rose 17%. In ECM, they rose 45%.
At JPMorgan 2012 was a bit more patchy. M&A revenues there fell 12% last year. DCM revenues rose a mere 8%. Only JPM’s ECM bankers were up to BofA’s standards – achieving a 46% increase.
4. Bank of America’s equities business had a very good year in 2013
Finally, Bank of America’s equities salespeople and traders also had a very favourable 12 months. In equities sales and trading, revenues rose 29% (after DVA) compared to 2012. At JPMorgan they rose 2%. Bank of America highlighted its increased equities market share in the presentation accompanying its results. Maybe its salespeople and traders will now get paid more? It’s about time – according to most recently available figures for 2012, the average member of risk-taking-government-registered code staff working for Bank of America Merrill Lynch in London is paid a merest $2.4m. At JPMorgan, comparable people are on $3.4m. That might be a reason to work for JPMorgan in itself.