Luxury problem

21 December 2016 By Antony Currie Follow @AntonyMCurrie

Shares of major banks have surged on hopes that Trump’s agenda will boost income. BofA, Citi and JPMorgan are now fairly valued and stand to gain as revenue grows. Morgan Stanley’s surplus capital may temper the firm’s rebound, though, unless DC’s new masters change the rules.

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Bank stocks, as measured by the KBW banks index, jumped more than 24 percent between Nov. 8, the day of the U.S. presidential election, and the market close on Dec. 20.

The top performers among the largest banks were Bank of America and Goldman Sachs, each of which jumped by 34 percent. Citigroup rose by 22 percent.

Jefferies, the investment-banking unit of Leucadia National LUK.N, on Dec. 20 reported fourth-quarter net income of $87 million on revenue of $742 million. Annualized return on equity was 6.5 percent. Earnings for the investment bank, whose financial year runs from Dec. 1 to Nov. 30, increased more than fourfold from a dismal fourth-quarter showing in 2015.

Revenue from fixed-income trading was $149 million, 23 percent lower than the third quarter but almost 16 times higher than last year's fourth quarter, when the bank restructured the division after months of disappointing results. Equities-trading revenue of $176 million was almost 19 percent higher than the third quarter and 43 percent higher than last year's fourth quarter.

Debt-underwriting revenue almost doubled from the same period last year to $128.7 million, which marked a 77 percent increase on the bank's third-quarter showing.

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