Wall Street’s biggest banks found few reasons to complain this earnings season.
Investment bankers were busier than they have been in years, trading desks thrived on volatility and resilient consumers kept lending businesses humming.
Here are the key trends from second-quarter results at the biggest U.S. banks, which often set the tone for the earnings season:
Investment banking windfall
Wall Street’s mega-IPOs and multibillion-dollar deals fuelled a surge in investment banking fees, lifting them to their highest level since the pandemic-era boom of 2021.
The bumper activity was headlined by the historic listing of Elon Musk’s SpaceX.
Global investment banking revenue topped US$60 billion in the first six months of the year, Dealogic data showed, with JPMorgan leading the league tables, followed by Goldman Sachs and Morgan Stanley.
Executives cited healthy pipelines and strong backlogs for the second half, fueling expectations that the investment banking “super cycle” still has further to run.
Trading desks cash in
Stock trading delivered blowout results as volatile markets kept trading desks on their toes in the second quarter. AI-related jitters, Middle East tensions and swings in energy markets drove client activity.
Market turbulence is often good for trading desks. Sharp price swings encourage investors to reposition portfolios, hedge risks and seize short-term opportunities.
Strong loan growth fuels income
Steady loan demand supported higher net interest income in the second quarter. Consumers remained resilient and spending stayed healthy, helping sustain borrowing.
“Consumer spending is solid, consumer credit remains durable and commercial defaults appear to be declining,” said Brian Mulberry, senior client portfolio manager at Zacks Investment Management, which owns several bank stocks.
While the prospect of a potential interest-rate hike later this year due to concerns over inflationary pressures could weigh on loan growth, analysts said second-quarter results exceeded expectations.
Executives said the U.S. economy remains robust and that they have yet to see any meaningful change in consumer behaviour.
Profits vs. expectations
All six major U.S. banks trounced Wall Street’s second-quarter profit expectations, with several analysts and investors describing the scale of the earnings beats as “extraordinary.”
By Manya Saini
