US banking giants reap gains from dealmaking rebound

[NEW YORK] Large US banks expressed optimism about the investment banking outlook for the rest of the year after dealmaking rebounded in the second quarter, as they reported in earnings on Tuesday (Jul 15). Yet lenders remained cautious about the uncertain economic environment and US tariff policies.

JPMorgan Chase, Citigroup and Wells Fargo kickstarted second quarter bank earnings on Tuesday, beating profit expectations as the US economy remained resilient even as US trade policies fuel market turbulence.

“Despite choppy waters at the start of the quarter in the wake of tariff uncertainty, banks weathered the volatility with business outlook improving as the quarter progressed,” KPMG’s US banking sector leader Peter Torrente said.

JPMorgan’s investment banking fees came in higher than their earlier guidance, growing by 7 per cent to $2.5 billion. Troy Rohrbaugh, co-CEO of JPMorgan’s commercial and investment bank, had said in May fees could fall by a mid-teens percentage.

Investment banking revenues at the largest US lender were helped by higher debt underwriting and advisory fees, while equity underwriting fees dropped.

Citigroup also reported a 15 per cent jump in investment banking revenues to US$981 million. It was buoyed by momentum in mergers and acquisitions, strength in convertibles and initial public offerings.

Wells Fargo reported an 8 per cent uptick in investment banking revenue to US$463 million.

“It certainly seems like volumes are picking up,” Wells Fargo chief financial officer Mike Santomassimo told reporters on a conference call. “We did see higher advisory fees in the quarter across some deals that flowed in the M&A space,” and increased fees in capital markets.

Bank of America, Goldman Sachs and Morgan Stanley will report their results on Wednesday.

While mergers and acquisition ground to a halt in April after US President Donald Trump announced plans to impose tariffs on numerous countries, optimism has picked up among investors in US stocks.

“There is, in general, more growing familiarity with how to deal with uncertainty and volatility” and the impact of tariffs, even if uncertainty persists, Citigroup chief financial officer Mark Mason told journalists on a conference call. “The general sentiment has improved a bit.” “We’re seeing really momentum across a multitude of sectors across the board, particularly in healthcare and tech,” he added. The pipeline looks good for activity in North America with financial sponsors, he said.

While bankers expect stalled deals to come back in the second half of the year, they also expressed caution.

JPMorgan’s chief financial officer Jeremy Barnum told reporters things look “a little more upbeat” in investment banking, but added concerns still remain. Industry executives are also hopeful that they will benefit from lighter regulations under Trump. Lenders recently also performed well at Federal Reserve’s stress test and showed they have enough capital to withstand possible adverse scenarios.

“Investors have come back to the reality that the US economy is strong… the stock market’s reflecting that,” BNY CEO Robin Vince told reporters on a conference call. REUTERS