World's biggest banks record most profitable year on record amid the pandemic

Earnings season showed the combined profits of a dozen of the largest banks over the past four quarters exceeded $170 billion, underscoring how dramatically the industry has changed from the early stage of the pandemic. J.P. Morgan Chase was particularly good, earning nearly $131 million a day. Goldman Sachs and Morgan Stanley both broke their own profit records, while European peers UBS and Barclays both posted their highest profits in a decade. Banks such as Deutsche Bank and Societe Generale said their business benefited from an improving global economy. Bank stocks reflected the impact of the wave of strong results, with the Dow Jones U.S. banking index up 59% over the past year and the Euro Stoxx banking index up 56%. For the world's largest investment banks, a simple but salient fact is that they are generating unprecedented profits.

Some successful deals early in the pandemic helped the banking sector. With last year's market volatility receding, investment bankers are gearing up to boost acquisitions and fundraising through special-purpose acquisition vehicles. Then as the world economy began to recover, banks with wealth management and asset management divisions enjoyed the dividends of the stock market.

Increased market activity has benefited once frustrated traders at Deutsche Bank and Barclays, with J.P. Morgan's investment banking business posting its best quarter on record for dealmaking and advisory fees.

It remains to be seen whether the sector can continue to break earnings records given the ongoing global Covid spread and record-low interest rates continuing to weigh on bank lending revenues. At the same time, the gloomy outlook in major economies, including house price inflation, has also put pressure on banks to cut provisions.