Wall Street's Earnings Week Bonanza Eases Investors' 2018 Pain

(Bloomberg) -- Bank investors were ready for some good news.

Shares of Goldman Sachs Group Inc. jumped the most for an earnings day since 2008, while Bank of America Corp.’s post-results climb was the steepest in more than seven years. For both firms, shareholders looked past bond-trading slumps and focused on bright spots like merger-advisory fees and lending income.

The stocks of all six of the biggest U.S. banks rose this week. That reversed some of the damage from last year, when the KBW Bank Index sank 20 percent as volatility pushed investors to the sidelines and concern about rising interest rates, trade skirmishes and signs of an economic slowdown weighed on sentiment. The drop was 16 percent in December alone.

“It’s gone from being extremely oversold to getting a lot of it back,” said Jeff Harte, an analyst at Sandler O’Neill & Partners. “Some of these stocks have already gotten back in January what they gave up in December.”

Goldman’s dealmakers got the credit Wednesday as shares of the company jumped more than 8 percent, the biggest intraday gain in seven years. Merger-advisory fees soared 56 percent in the fourth quarter, which was more than enough to divert attention away from the firm’s ongoing slump in fixed-income trading, where revenue tumbled 18 percent.

At Bank of America, the consumer business drove earnings to a record $7.3 billion, and revenue of $22.7 billion exceeded analysts’ estimates. Average deposits in the retail-banking division rose 3 percent, net interest income climbed 12 percent and average loans increased 5 percent. The bank’s fixed-income decline was 15 percent.

It was a similar story Monday when Citigroup Inc. launched earnings week with a 4 percent share surge. Investors forgave a plunge in bond-trading revenue and focused instead on higher fees from merger advice, a lower tax bill, and the company’s positive statements about trends in the first few weeks of 2019.

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