The banking sector in the United States is set to make history as the top six Wall Street banks are going to post a trillion-dollar decade for the first time. According to a report by Bloomberg, major banks of Wall Street, JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley together made nearly one trillion dollars in profits over the last ten years.
It is important to note that at the beginning of this decade, banks were facing a global out lash for their role in the 2008 global financial crisis. The government of the United States had to give these banks billions of dollars in order to avoid a complete meltdown of the banking sector.
Various scandals and fraud cases also forced these major banks to make compensation and settlement payments in large amounts.
Even though everyone was expecting a slowdown of the banking sector, data compiled by Bloomberg suggests that major Wall Street banks made billions in profit over the years, outpacing several publically traded companies in the United States. Analysts are stating multiple reasons for this dream run by corporate banks.
Following the fiasco created by the 2008 economic collapse, most of the attention was on Wall Street, and profits made by investors and companies. As investors and companies began making huge profits in the stock market, banks started getting portions of the gains. Decisions of former US President Donald Trump, to slash taxes, also helped banks make billions in profit over the years.
The tax cuts announced by the Trump administration helped banks bring down their tax bills and boost profits. Major Wall Street banks, which made nearly 70 billion dollars in 2017, witnessed their earnings go well above 120 billion dollars in 2018. A slight increase in interest rates and higher demand for retail banking also helped banks find out new arenas to make profits.
The COVID-19 pandemic also had impacts on the performance of banks as the government rolled out relief programs for consumers and businesses, and the Federal Reserve bought trillions of dollars of assets. As Wall Street became volatile again, corporations and investors began borrowing large sums of money from the banks.
Mergers and acquisitions also became a trend in the market as stronger entities were trying to buy weakened competitors. Profits in 2021 also had help from an accounting move: The banks felt good enough about the economy, thanks to government intervention, to release some of the reserves they had set aside in case of loans soured. The Big Six made more profit in 2021 than in 2013 and 2014 combined.
