(Bloomberg) -- JPMorgan Chase & Co. reported record profit as investment bankers and equities traders at the biggest U.S. bank smashed expectations and the firm took a multibillion-dollar gain tied to a Visa Inc. share exchange.
Fees from investment banking soared past analysts’ estimates, jumping 50 per cent, while the firm’s equity traders notched a 21 per cent revenue jump. The Visa transaction added US$7.9 billion to second-quarter profit.
More businesses are doing deals again after a long lull, allowing investment bankers to contribute a larger share of their banks’ bottom lines despite the elevated cost of borrowing, lingering uncertainty posed by the U.S. election and global geopolitical issues.
“There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Chief Executive Officer Jamie Dimon said in a statement Friday. “Therefore, inflation and interest rates may stay higher than the market expects.”
JPMorgan, Wells Fargo & Co. and Citigroup Inc. kick off big bank earnings Friday, with Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley set to report next week. Investors are eager to hear from the industry’s top brass on the state of the U.S. economy and expectations for the rest of the year, including the potential impact of U.S. elections in November.
Despite notching the highest quarterly profit in the history of American banking, JPMorgan’s results fell short on a few key metrics. Net interest income came in at $22.7 billion for the quarter, up four per cent but slightly below estimates, while expenses climbed more than expected. The bank also took its highest provision for loan losses since the early days of the pandemic.
Shares of JPMorgan fell 0.9 per cent in early New York trading. The largest U.S. banks — with the exception of Morgan Stanley — are up more than 20 per cent this year.
Record profit
JPMorgan earned $18.1 billion in net income in the second quarter, up 25 per cent from the previous record a year earlier and ahead of analysts’ expectations.
The bank crushed expectations across its Wall Street businesses: Investment-banking fees soared to $2.4 billion — well ahead of the firm’s own prediction last month. Equities traders also trounced estimates with a jump to nearly $3 billion, which helped bring JPMorgan’s total trading haul to $7.8 billion.
NII — the difference between what banks earn on their assets and what they pay on debts — at the four largest lenders surged to a record last year, fueled by higher interest rates. But analysts are predicting the second quarter will show a second straight drop.
JPMorgan reiterated that it expects to earn about $91 billion in NII this year. It had lifted that guidance in May, citing expectations that the U.S. Federal Reserve will lower interest rates at a slower pace than what was expected earlier in the year.
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