JPMorgan Chase & Co. (JPM.US) delivered an unexpected second-quarter rebound in investment banking revenue, signaling a potential revival in dealmaking after widespread hesitation triggered by U.S. tariff policies. Tuesday's earnings report revealed a 7% increase in investment banking fees, dramatically outperforming analysts' projected 14% decline. The quarter also witnessed record-breaking stock trading results—the strongest second quarter ever—while fixed-income trading significantly exceeded expectations.
Propelled by these robust performances in investment banking and trading, JPMorgan’s adjusted Q2 earnings per share reached $4.96, far surpassing the $4.48 consensus estimate. CEO Jamie Dimon noted in a statement, "Activity started slow early in the year but accelerated as the quarter progressed amid improved sentiment." This unexpectedly strong investment banking result offers the first clear indication of how the banking sector weathered the Trump administration's volatile tariff stance while providing fresh insights into the health of U.S. consumers and businesses.
Throughout 2019, merger advisory activity at major banks remained a key investor concern. Anticipated market recovery stalled amid contradictory tariff declarations, prompting numerous corporate CEOs to adopt a wait-and-see approach. Doug Petno, co-head of JPMorgan’s Commercial & Investment Bank, told investors in May that many clients had "slammed the brakes" during policy turbulence.
"The U.S. economy continues to show resilience," Dimon added. "Pro-growth policies like tax reform and regulatory relief support confidence, though risks persist—including tariff uncertainty, geopolitical tensions, high deficits, and asset price valuations." JPMorgan shares, already up 20% year-to-date through Monday, climbed over 2% further in pre-market trading following the earnings release as investors repositioned portfolios to hedge against tariff shifts.
Breaking down the results: Debt underwriting revenue surged 12% year-over-year, while M&A advisory fees rose 8%. Though equity underwriting revenue fell 6%, it vastly outperformed the anticipated 29% plunge. Fixed-income trading generated $5.69 billion, substantially above the $5.22 billion consensus. Stock trading revenue hit $3.25 billion, marking a second consecutive record quarter.
Notably, net interest income for the quarter ended June 30 slightly missed projections. However, the bank raised its full-year NII forecast to $95.5 billion from $94.5 billion. Loan loss provisions totaled just $439 million, well below the $761 million analysts expected. Meanwhile, investors closely monitor executives' capital strategies ahead of the Federal Reserve's upcoming capital rules meeting. After clearing a simplified stress test last month, JPMorgan promptly announced dividend hikes and launched its largest-ever share buyback program. A late-June Fed proposal to modify the "enhanced supplementary leverage ratio" rule offers additional regulatory tailwinds for the sector.