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Big banks in America have ridden a dealmaking boom that has helped drive demand for corporate loans and pulled record-breaking fees from the wild swings in financial markets. But the most surprising and intriguing news so far in the past week’s earnings parade of the US financial sector was the diverging fortunes of bond traders at Goldman Sachs and JPMorgan Chase.
The war in the West Asia has created a huge amount of uncertainty since the American and Israeli attacks on Iran began at the end of February, but mergers and acquisitions still got done and US commercial and industrial loans jumped by the most in more than three years.
Fund raising by companies was also strong for most of the first quarter, offering early hope of fat bonuses for investment bankers and traders.
Not everyone benefitted equally, though. JPMorgan and Citigroup both reported record quarters for their markets businesses on Tuesday. Goldman, too, smashed its best result in stock trading the day before, driven mainly by a massive jump in income from lending to hedge funds, but slipped up in bond trading, missing expectations and shocking investors.
Goldman Sachs leaned heavily into greater risk-taking in the first quarter and grew its balance sheet more aggressively than rivals. Its total assets were up 14% at the end of the quarter compared with the end of last year, the biggest quarterly increase in more than three years. And it used a lot of spare capital to fuel that growth, with its risk-weighted assets also rising sharply.
JPMorgan also grew total assets at a rapid pace of nearly 11% over the first quarter, but it focused mainly on very low-risk financing for its trading clients; the bank’s total risk-weighted assets barely changed. In other words, JPMorgan used the same capital to generate its record revenue.
Another data point further illustrates the differences between the two banks’ approaches: value-at-risk. This somewhat wonky measure tells investors how much money a bank could lose on a really bad day.
At JPMorgan, this number was roughly flat in the first quarter compared with the final three months of 2025 and down by 26% versus the first quarter last year.
At Goldman Sachs, the same measure was up 40% and 23% respectively. The investment bank allowed its traders to take a lot more risk. Its commodities and currencies desks reaped the benefits of that, while its government bond and mortgage traders managed to do significantly worse than last year.
Goldman executives didn’t offer much detail, other than saying that the market-making environment was tougher—but that didn’t seem to affect rivals.
JPMorgan and Citigroup both said revenue growth was strong across most products in fixed-income trading, including spread products, which typically includes mortgage bonds. JPMorgan did say government debt trading was weaker.
The fact that Goldman Sachs missed forecasts for this part of its markets business, while also putting a lot more capital to work than peers, helps explain why its shares have underperformed those two rivals in the past two days.
Goldman Sachs likely felt comfortable deploying more capital more rapidly in the quarter because it expects to benefit from regulatory changes proposed last month by the Federal Reserve, America’s central bank. Those are expected to cut overall capital requirements for the biggest US banks by nearly 5%.
Most banks have been tight-lipped on how much the changes will boost their spare capital because there is a comment period on the rules that many will likely use to push for even greater relief in some areas.
However, JPMorgan reckons that the changes will force it to hold 4% more capital, which would cost it an extra $20 billion compared with its current minimum requirements. Its complaint is about how the Federal Reserve proposes to calculate the extra safeguards for globally systemically important banks.
This is especially ironic because those changes are meant to be the ones delivering the greatest relief—and it is the segment of capital requirements where big US banks already face much tougher standards than international rivals.
To be sure, JPMorgan still has vastly more excess capital than its rivals, but it would be absurd if the Fed’s quest to make banking rules simpler and looser ended up penalizing the lender.
Note that none of these rule changes affected how JPMorgan approached its trading or lending businesses last quarter. And as the bank showed Goldman Sachs, you can have a knockout quarter across the board without putting lots of capital on the line. ©Bloomberg
The author is a Bloomberg Opinion columnist covering banking and finance.