Goldman Sachs, JPMorgan Chase talk AI, cryptocurrency, digitization amid strong first quarters
Goldman Sachs and JPMorgan Chase reported strong first quarter results, gave optimistic views on the economy coming out of the COVID-19 pandemic and highlighted various digital transformation efforts.
Investment banking and a boom propelled Goldman Sachs to a stellar first quarter. Goldman Sachs benefited from companies going public as well as trading. The investment bank doubled first quarter revenue to $17.7 billion with earnings of $18.60 a share. JPMorgan Chase reported first quarter revenue of $33.12 billion, up 14% from a year ago, with earnings of $4.50 a share.
While the results and view of the economy are always the headliner from these two giant banks, there were multiple technology nuggets to ponder.
Goldman Sachs CEO David Solomon and JP Morgan Chase CEO Jamie Dimon touched on fintech, AI, cryptocurrency and the new normal for work on their respective earnings conference calls. Here's a look at the takeaways.
JPMorgan Chase is ramping up artificial intelligence deployments. Dimon said that the bank is focused on adding personalization and digitization across its portfolio. JPMorgan Chase is also looking to automate and getting rid of financial pain points. Dimon said:
It's incumbent upon us to go faster to the cloud. We already have 150 major AI projects. But my guess is in 5 years, it will be 1,000 AI projects. So, we're going as fast as we can to do a great job for customers.
Goldman Sachs is focusing on direct-to-consumer offerings based on the success of its Marcus digital bank. Marcus Invest, a digital investment service, is looking to leverage Goldman Sachs consumer banking brand to create a Robin Hood rival. Solomon said consumers can invest with as little as $1,000 in their accounts. Marcus will also launch digital checking in the US.
Special purpose acquisition companies, or SPACs, have been an avenue for multiple technology firms to go public, but need to evolve. Many of these SPAC deals feature companies early in their development. Solomon said: "On SPACs, we continue to believe that providing sponsors a mechanism to access public markets for capital formation is an innovation that's here to stay. However, as a meaningful participant in this market, we will continue to be thoughtful regarding the transactions we underwrite with a particular focus on the quality of sponsors, sponsor economics, investor protections and disclosure. We believe the industry should evolve on these important issues in the interest of more efficient and transparent markets."
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Cryptocurrency is real and it's going to be disruptive. Solomon said cryptocurrency, blockchain and the digitization of money will lead to "significant disruption and change in the way money moves around the world." Solomon said:
Central banks are looking at digital currencies and working to apply this technology to the local markets and determine the longer-term impact on global payment systems. There's also significant focus on cryptocurrencies like Bitcoin, where the trajectory is less clear as market participants evaluate their possibility as a store of value. At Goldman Sachs, we continue to look for ways to expand our capabilities to support our clients' needs and evaluate applications to improve our organizational efficiency. Of course, we need to operate within the current regulatory guidelines. For example, we cannot own Bitcoin or trade it as [principal.] Goldman Sachs will play a role in these innovations as they are important to our clients and important to the future of global financial systems.
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Goldman Sachs is plotting a return to offices but realizes the employee burnout is real. Solomon said:
We have a vibrant partnership and a deep bench of talent across the organization. Many will spend their entire career with us. Some will even become clients of the firm. This is a virtuous ecosystem that has been in place for decades. It is also aligned with the evolution of our partnership strategy, where we're working to continue to make the partnership more aspirational. I recognize there's an enormous amount of discussion about how companies will operate their businesses post-pandemic. For Goldman Sachs, our people operate at their best when they are forging close bonds with colleagues and furthering the apprenticeship culture that has defined us. We have found that the best way to do that is to work together in person on a regular basis. Let me be clear, achieving the objective of bringing our colleagues back to the office is not inconsistent with the desire to provide our people with the flexibility they need to manage the personal and professional lives, which is the way we have always run this firm.
Solomon, however, noted that the COVID-19 pandemic has been tough on employees and Goldman Sachs is taking steps to be mindful of wellbeing for its workers. He added:
As you can now see from our results, client activity is extraordinarily high, and I fully appreciate how busy our people have been. This has been exacerbated by the isolation of working remotely in a COVID-19 environment. To address this, we are taking concrete actions, including additional hiring, reallocating resources, and pursuing stricter enforcements of boundaries. In this 24/7 connected world, we have to help those transitioning into the workforce to understand that Goldman Sachs is a place where we work very hard to serve our clients, but also need to be thoughtful about personal resilience and well-being.