Banking on the US …

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Welcome to the Supernatural Stocks podcast on Moneyweb, with your host The Finance Ghost – your weekly fix of local and international insights for investors and traders.

In the past year, Goldman Sachs is up 59% and JPMorgan is up nearly 22%. These are my two US banking positions, and I remain very happy with both.

As I’ve mentioned before, my logic is that the US remains the deepest and most exciting capital pool in the world. And if I’m going to go fishing in that pool, I would like to pick the most talented operators with the best brands. These are firmly buy-and-forget positions in my portfolio.

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There’s been an interesting divergence in the share price performance of these two stocks since November 2025. This is when Goldman started to pull ahead, with the correlation having broken down even further in the past few weeks.

There are a few reasons for this.

One of them is that Goldman Sachs got incredibly lucky with the timing of the offload of the Apple Card business to JPMorgan. The ink was practically still wet on the page when [US President Donald] Trump posted about wanting a cap on interest rates charged on cards. Whether that will happen or not isn’t the point.

The point is that the market is now more scared of cards and how banks traditionally earn money from consumers, something that JPMorgan is exposed to and Goldman Sachs is not.

Another important observation from the latest quarter is that Goldman’s incredible positioning in investment banking is shining through. JPMorgan is also a huge name in that space, but nobody comes close to Goldman Sachs.

The Ferrari of investment banking

David Solomon, CEO of Goldman Sachs, talks about the aim of being the most exceptional financial institution in the world.

It’s more about maintaining this position than achieving it for them, as there’s little doubt about who the Ferrari of investment banking is.

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Goldman Sachs has been the #1 mergers and acquisitions [M&A] advisor for 23 consecutive years, an astonishing achievement in such a competitive market. In 2025, they advised on $1.6 trillion in announced M&A volumes, more than $250 billion ahead of the next closest competitor.

Their summer internship programme has a selection rate of less than 1%. The very best minds fight for the privilege to work at Goldman Sachs. And why wouldn’t I want to be invested in the best minds?

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Investment banking fees were up 25% in the quarter and the investment banking backlog – effectively their pipeline – is sitting on a four-year high.

They talk about being in a more supportive M&A environment that allows more consolidation and dealmaking than the previous regulatory approach in the US.

That’s always good news for bankers and ambitious CEOs who enjoy rolling the dice with that most delightful of all concepts: Other People’s Money.

What does this help them do at Goldman Sachs?

Maximise revenue per employee of course, a critical metric at Goldman Sachs that is going to get even more attention in years to come as they undertake artificial intelligence [AI] programmes designed to make the best minds even more efficient.

It’s impossible to overstate the importance of that investment banking pipeline. They talk about the flywheel effect of M&A, in which deals lead to other fee-earning opportunities.

The most obvious one is to advise on and provide the debt. There’s also hedging activity, secondary market making for listings, and the opportunity to be the wealth advisor for that freshly minted high net-worth individual after the sale of a business.

Cross-selling and servicing clients efficiently is always a challenge in these businesses. There are plenty of talented chefs in the kitchen and it’s a hyper-competitive environment for bonuses and recognition. Goldman Sachs created what they call the Capital Solutions Group, essentially a hub to offer clients a comprehensive suite of services based on the core strengths at the group.

The corporate relationships that feed this machine have been built and handed down since the firm was founded in 1869. As moats go, this is a pretty wide one.

More durable cash flows

As great as the investment banking business is, it still leaves Goldman Sachs exposed to the whims of the market and the overall levels of activity.

To address this, they’ve been working hard in recent years to improve the risk profile of the group. Since 2020, they’ve achieved a 90% reduction in principal investments (these are investments on their balance sheet with their own money), and they’ve doubled what they refer to as ‘more durable’ revenues.

This creates a less risky business with a focus on capital-light ways to make money.

This means less onerous results from stress testing and thus a smaller capital buffer. That’s good news for return on capital, a key driver of the valuation.

And where they are using their balance sheet, they are looking for income lines that have lower correlation with market returns. For example, they’ve been focusing on asset-backed financings across infrastructure, transportation and data centres.

The durability is also in the asset and wealth management business, particularly around fees that aren’t directly linked to market performance. It’s hard to get away from market exposure, as the fees are still earned on total asset values and of course these rise and fall with markets.

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But if the share of revenue from management fees versus outright performance fees is increasing over time, then so too is the durability.

Wealth management is an extremely fragmented business and there is a long runway for growth.

Goldman Sachs believes that they have mid-single-digit market share in ultra-high net worth clients, which, of course, is the most flattering segmental view possible for them.

They make this point on purpose to show just how big the opportunity is for them.

Within the asset management business, alternative assets are still absolutely cooking.

They expect to raise between $75 billion and $100 billion every year, which in turn is expected to drive double-digit growth in alternative management and other fees. The targets are alternative assets under supervision of $750 billion by 2030, supporting $1 billion in annual incentive fees. Talk about a pocket of growth!

The Goldman Sachs machine marches on.

What about JPMorgan?

Things are still going well at JPMorgan for the most part.

Revenue growth was ahead of expense growth, with expanding margins as a key metric that the market loves seeing.

That will come under some pressure though, with management making it clear that they need to invest in the business and that they don’t aim to have a constantly expanding margin – an impossible thing to achieve into perpetuity.

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The timing around the Apple Card issue is just extremely unlucky. It seems unlikely that a cap on card rates will actually come through, but politicians have also been pushing for this for a long time and it is obviously a populist policy. It’s just odd to see it come from the Republican camp now as well, not just the Democrats.

JPMorgan’s execs speak about it bluntly on the call, noting that credit cards are a highly competitive environment where market forces have established the correct pricing over time.

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When you have an external force deciding by decree what that rate should be, then the inevitable outcome is that capital will be allocated elsewhere and access to credit via credit cards will dry up. Time will tell what happens here.

Political noise aside, the most disappointing number in the quarter for me was a 5% dip in investment banking fees versus a demanding base.

That didn’t look too bad in the context of other major banks in the market – that is, until Goldman Sachs released numbers.

At least the equities business at JPMorgan is doing very well, up 40% thanks to market volatility, increased flow and a particularly strong showing by the prime broking business that services hedge funds.

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There are a number of other highlights, like 13% revenue growth in the asset and wealth management business. They may not be as niche as Goldman Sachs, but they still have a strong offering there. Record net asset inflows from clients is never a bad thing to see.

Overall, Goldman Sachs might have pulled ahead as the star of this show, but JPMorgan remains an incredible business that I plan to hold forever.

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