Wall Street Banks Raked in Fees Amid COVID-19... "68 Trillion Won in the First Half of the Year"

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Major Wall Street investment banks in the U.S. recorded their highest-ever fee income amid the COVID-19 pandemic. As companies hit hard economically by COVID-19 sought funding, banks actually benefited from a 'COVID-19 boom.'

According to major foreign media and global financial information company Refinitiv on the 29th (local time), investment banks' fee income in the first half of this year reached $57 billion (as of the 27th, approximately 68.4 trillion KRW), marking an all-time high. This surpassed the previous record of $54.9 billion set by Wall Street investment banks in 2018.

The reason banks' fee income hit a record high was due to a significant increase in corporate funding demand. Since March, when COVID-19 spread across the U.S. and Europe, automaker Ford, cruise operator Carnival, and aircraft manufacturer Boeing secured hundreds of millions of dollars through Wall Street banks. The funds these companies raised this year through bond issuance, loan expansion, and stock sales exceeded $7.8 trillion. The Federal Reserve's active purchase of corporate bonds and efforts to secure liquidity also contributed to banks earning fees. Foreign media analyzed that this more than offset the revenue decline from mergers and acquisitions (M&A) procedures.

Among banks, the five major ones?JP Morgan Chase, Goldman Sachs, Bank of America (BoA), Citigroup, and Morgan Stanley?benefited the most. Their fee income in the first half reached $18.3 billion, representing the second-highest market share in the past decade, according to foreign media.

However, investment banks cannot be complacent with fee income alone. If the economic downturn affects their main clients?households and companies?the scale of loan defaults could increase, requiring higher loan loss provisions. Additionally, as the federal government allowed borrowers to defer debt repayments as part of economic stimulus measures, it has become difficult for banks to obtain information about borrowers and accurately assess creditworthiness. The Wall Street Journal (WSJ) reported that credit card limits and personal loan amounts have decreased since the COVID-19 pandemic, stating, "Banks are tightening lending standards and seeking new information to identify who is risky and who is not."

Despite the increase in fee income, bank stocks have fallen significantly over the first half of the year. According to Bloomberg, the KBW Bank Index, which tracks major U.S. banks' stock prices, plummeted more than 36% during the first half. Considering that the Dow Jones Index fell about 10% during the same period, the recovery of bank stocks remains slow.

Earlier, on the 25th, the Fed conducted stress tests on major U.S. banks and warned that if the recession caused by COVID-19 prolongs, losses could reach up to $700 billion. Consequently, it decided to restrict share buybacks and dividend payments from July to September.

On this day, major investment banks such as JP Morgan, Goldman Sachs, Morgan Stanley, and BoA announced they could maintain dividend payments at current levels. However, Wells Fargo said it would reduce its third-quarter dividend and would announce the new dividend amount by the 14th of next month.

This content was produced with the assistance of AI translation services.