Investment banks are struggling in a high-interest-rate world

Shareholders like profits: a steady stream of income they can count on, quarter after quarter. The earnings America’s biggest banks make, however, are often pushed around by the volatility of the economy they serve. If the economy accelerates, demand for loans takes off; if it slows, bankers must set aside provisions for bad loans. Investment banks’ trading businesses tend to do well in times of and uncertainty, but their advisory services sell best when markets are healthy and stable. Bank bosses must try to balance their exposure to these forces.The past three years, during which the American economy has experienced a pandemic-induced shutdown, a financial boom and a rate shock, have been unusually volatile. As a result, the period has been an interesting test of just how successful bank bosses have been in their efforts to balance the performance of their businesses. The results were on show between January 13th and 17th as Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo took it in turns to report fourth quarter and full-year earnings.