JPMorgan posts profit record on Visa gain, dealmaking revival

JPMorgan Chase & Co. reported record profit as investment bankers and equities traders at the biggest US 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%, while the firm’s equity traders notched a 21% revenue jump. The Visa transaction added $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 US 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. kicked off big bank earnings Friday, with Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley set to report next week. Wells Fargo’s expenses climbed more than analysts expected for the second quarter and Citigroup said its costs will probably be at the high end of the range it previously forecast. 

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 4% 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 dropped 1.7% to $203.85 at 9:41 a.m. in New York. Wells Fargo slid 6.4% and Citigroup dropped 2.4%. 

Record Profit

JPMorgan earned $18.1 billion in net income in the second quarter, up 25% 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 Federal Reserve will lower interest rates at a slower pace than what was expected earlier in the year.