NEW YORK (Reuters) – Profits at some of the biggest U.S. lenders rose in the fourth quarter as dealmaking picked up and trading was boosted by a strong equity market, sparking a rally in banking stocks on Wednesday.

The market environment is favorable for banks. Equity markets surged, with a rise of 23.3% in 2024, as deal volumes increased and strong demand for bond underwriting boosted investment-banking fees.

Shares of banks that reported earnings on Wednesday rose between 5.9% for Goldman Sachs and 0.9% for JPMorgan Chase (NYSE: ). Bank of America and Morgan Stanley (NYSE: ) will report results on Thursday.

“Animal spirits are back,” said Stephen Biggar, banking analyst at Argus Research, referring to the tendency of investors’ emotions to drive stock prices. “There are good times to be overexposed to capital market returns, and this is one of them.”

Goldman Sachs recorded its biggest quarterly profit since the third quarter of 2021, at $4.11 billion, helped by deal fees, debt sales and trading. Fourth quarter global banking and markets revenues increased 33.4% year-over-year and the bank posted record annual net income in equities.

The bank said in a statement that its prospects for investment-banking fees were greater in December than in September, offering an optimistic outlook for the coming months.

JPMorgan Chase posted a nearly 50% rise in net income as investment banking fees and trading revenues jumped in the last quarter, with CEO Jamie Dimon hoping for more favorable conditions to will come

The earnings reports come days before the inauguration on Monday of President-elect Donald Trump, who has promoted an agenda of deregulation and lower taxes. Lighter regulation could spur an increase in deal-making, which would boost banks’ fee revenues.

“Businesses are more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business,” Dimon said in a statement.

A rebound in the dealmaking drive Wells Fargo (NYSE:) profit was 47.3% higher, at $5.1 billion, as investment-banking fees jumped 59% to $725 million in the quarter compared to a year ago.

Citigroup (NYSE:)’s quarterly profit beat estimates, helped by more trading and deals. Investment-banking revenue rose 35% to $925 million.

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The possibility of looser regulation under Trump could help improve the performance of banks. Michael Barr, the Federal Reserve’s top regulatory cop, announced this month that he was resigning. His exit clears the way for Trump to appoint an official with a more industry-friendly agenda.

Analysts are eager to hear more from bank executives about the outlook for investment-banking and net interest income, which is the difference between what banks earn from loans and what they pay for. of deposits. Investors expect the Federal Reserve to cut interest rates.

Wells Fargo and JPMorgan reported a drop in the NII in the fourth quarter. However, Wells Fargo projects that the NII will begin to increase again in 2025, boosted by a pickup in loan demand and lower deposit costs, while JPMorgan forecasts the NII at a higher level than projected in analysts.

said overall, the US economy is in good shape, helped by strong consumer spending.

“The US economy is strong,” Dimon said.