Top five Swiss bank Julius Baer Group, which manages $427 billion in assets, announced on July 20 that its profit increased by $524 million in the last two quarters. The bank most likely benefited from an increase in trading revenues throughout the U.S. and Europe.
The profit of Julius Baer reportedly spiked by 34% in the first half of 2020. It coincides with the bank’s introduction of a custodial service for digital assets — like Bitcoin (BTC) — in January.
Overall surge in global banking revenues or Bitcoin integration?
The trend of major banks in the second quarter of 2020 suggests a massive increase in trading revenues. The pandemic and the introduction of stimulus packages drove a retail “fear of missing out” (FOMO) rally in the stock market.
The noticeable increase in retail demand for stocks led the revenues of banks, especially for trading departments, to surge. JPMorgan, as an example, earned $4.7 billion in net income in the second quarter of 2020. The U.S. investment bank posted its highest quarterly revenue in history.
JPMorgan CEO Jamie Dimon said on July 14:
"We earned $4.7 billion of net income in the second quarter despite building $8.9 billion of credit reserves because we generated our highest quarterly revenue ever, which demonstrates the benefit of our diversified global business model.”
Like other banks, the rise in Julius Baer’s profit likely comes from heightened levels of retail trading since the start of April. While Bitcoin recorded high volatility from March to May, since June onwards, it has seen historically low levels of volatility.
Stocks have been significantly more volatile in recent weeks. Sellers and buyers triggered large short-term movements in the stock market, as the anticipation of new stimulus continuously increased.
But, as Coinbase explained, Bitcoin saw a big spike in demand from retail users in the aftermath of “Black Thursday.” On March 13, BTC dropped to as low as sub-$3,600, causing havoc in the cryptocurrency market.
The price of Bitcoin dropped to sub-$3,600 in March. Source: TradingView.com
In the following two months since the massive correction, Bitcoin saw a 190% rally from $3,600 to $10,440. Since Julius Baer added support for digital assets in January, it might have benefited from Bitcoin’s volatility from March to May.
Julius Baer said on January 21:
“Julius Baer has extended its service range and as of now includes digital assets offerings such as secure storage and transaction solutions […]. The Bank is able to offer access to a select group of cryptocurrencies, chosen for their tradability, safety, and technical reliability.”
More banks are seemingly becoming more comfortable with crypto
Since early 2020, an increasing number of major financial institutions have started to support Bitcoin exchanges.
On May 12, for instance, JPMorgan Chase added Coinbase and Gemini as its clients. This suggests that major banks are starting to embrace the new asset class. In previous years, JPMorgan CEO Jamie Dimon heavily criticized Bitcoin, saying “it’s not a real thing” according to CNBC.
The spike in profit of increasingly crypto-friendly banks, such as Julius Bear and JPMorgan, appears to be another sign of increasing institutional demand and the improving perception of Bitcoin as an alternative asset class.