KKR Looks More Like Goldman, and Vice Versa

KKR is expanding a business that rivals large investment banks including Goldman Sachs.

The firm known for shepherding its own buyouts has been getting good at placing debt for those deals. And for the first time, it broke into the top tier for U.S. buyout loans, with more than 50% of its business coming from outside clients.

We spoke to the people building up KKR Capital Markets -- as well as its rivals and clients -- and here’s their vision to expand internationally and into equities. Still, there are doubts about whether KKR can expand without a larger sales and trading operation.

Meanwhile over at Goldman, the bank is highlighting its private equity prowess more aggressively. We’ve known that it’s gearing up to raise more money for its merchant bank and is approaching the size of KKR in terms of assets.

And on Wednesday, Goldman said equity investment gains surged by 96% in the final three months of last year. When asked why the bank feels comfortable putting $22 billion of such investments on its own balance sheet, which is nearly three times Blackstone’s amount, CEO David Solomon said:

“What’s happened because of the way we run our business is, we’ve built out a very, very broad deep global network of investors all over the world and we think that’s a real asset.”

The question that remains is: What happens when banks and private equity start to get further into each others’ businesses?

Yikes.

Even though Goldman gained in most business lines for the end of last year, its legal charges swelled to the highest in four years. We break down Goldman’s results here for Bloomberg Television.

Speaking of litigation charges, there was some concern about Wells Fargo’s trajectory after Charlie Scharf’s first earnings call as CEO. Chris Kotowski of Oppenheimer said analysts peppered him unsuccessfully with questions about future expenses and pending moves:

“The answer of course was always something like, “We’re working on it, and will let you know when we have something more to say.” We fear that at least the next two earnings calls will have this flavor.

My colleague Hannah Levitt notes that Wells Fargo’s stock is trading below where it was when the fake-accounts settlements were announced in September of 2016.

Stars are Rising

Citigroup’s Jane Fraser -- who’s fresh on a new job turning around the consumer bank -- had her division post the strongest fourth quarter in half a decade. Fraser is in a prime spot to one day succeed CEO Michael Corbat -- and to be the first woman to lead a major U.S. bank.

Over at JPMorgan, Jennifer Piepszak -- months into her role as chief financial officer and also on a list of potential Jamie Dimon heirs -- outlined how her firm posted the best year for any U.S. bank in history. Fixed-income trading somehow beat Wall Street estimates by a whopping $1 billion, and had the biggest jump of any bank that’s reported results so far.

At Bank of America, CEO Brian Moynihan gave a shout-out to his top dealmaker. Matthew Koder was named the head of corporate and investment banking in late 2018, and Moynihan said Wednesday that the team regained market share that was lost a few years ago.

What’s more is that Bank of America says it’s hiring. So is JPMorgan. Headcount is up at Citigroup. Things aren’t looking all too bad these days at the big six, barring no bad news from Morgan Stanley on Thursday.

More on Wall Street

• Evercore CEO Ralph Schlosstein joined us on Bloomberg Television this week, setting a new bar for the firm after surpassing Citigroup and Bank of America in advisory fees in 2018. “We’re now No. 4 in the world in advisory revenues,” he said. “I basically said to our partners, our goal is not to be No. 4, it’s to be one of four and mentioned in the same breath as Goldman Sachs, JPMorgan and Morgan Stanley.”
• An early investor in Plaid talks to us for BTV on why they invested in the firm that counts Venmo, Robinhood and many others as its clients. Plaid agreed to sell to Visa this week for more than $5 billion.
• Paul Taubman’s PJT Partners hired Greg Dalvito -- who co-led technology banking in the Americas at Barclays -- as the media and telecommunications rainmaker expands his firm into different businesses.
• Morgan Stanley promotes a fewer number of people to its most elite rank, plus our read-through on the decision for Bloomberg Television.
• Citigroup is the only bank to detail gender pay, and it starts to close the gap.
• BlackRock assets rise to a record $7.4 trillion, we report for BTV, and Larry Fink looks to tackle climate change just as Davos puts “stakeholder capitalism’ at the forefront of its agenda.

Breakneck speed to the start of 2019. I leave for the World Economic Forum this weekend and hope you’ll follow -- I will be doing a Davos Diary for Bloomberg Television while you can follow along here in print. If you have notes to share, please send them my way. See some of you there!