It’s a good time to be an elite banker

When the world’s biggest health crisis in a century struck in February, central bankers and politicians rushed to protect their economies. The devastation of lockdown threatened even the soundest financial firms, whose collapse would have worsened the crisis.
But the trillions of dollars plowed into companies and households, accompanied by the easing of regulatory demands on lenders, didn’t merely ensure the financial system was cushioned
from the shock. For some pockets of global finance, having oodles of fresh liquidity has been a massive boon — even as economies crumbled.
Plenty of banks have been doing rather well, and getting bigger. Bolstered by strong capital and cheap funding, 2020’s winners should ride the wave of monetary expansion in 2021, even if economic growth might take years to recover. Granted, the trajectories of the pandemic and the economy remain uncertain. Accommodative policies could be curtailed before a vaccine has properly taken effect. Nonetheless, the odds are skewed in favour of financial firms that facilitate and manage this huge gusher of liquidity.
Big trading operations have been the chief beneficiaries. Since the Lehman crisis, trading has been concentrated in fewer banks, widening the gap between the finance industry’s haves and have nots. This year’s bursts of volatility, enormous market rotations and soaring asset values have rewarded Wall Street with unprecedented revenue. In the first nine months, trading income at the top-10 firms rose by about a third, according to McKinsey & Co, with the US giants taking more market share from their few remaining European rivals. JPMorgan Chase & Co, the biggest Wall Street beast, says its revenue is on course to rise by 20% in the fourth quarter.
While securities firms aren’t budgeting for a repeat of 2020’s bonanza next year, investment banking revenue should still look much better than it did in 2019, when the business appeared to be on a relentless downward trend.
Conditions remain ideal for bankers. Record debt sales this year will led to more refinancing. Governments continue to unleash economic support and central banks keep easing monetary policy. As the rollout of vaccines begins, economic optimism is awakening animal spirits. M&A is rebounding sharply. Financing and capital-markets activity should follow.
—Bloomberg