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JPMorgan (JPM) to See 1-2% Dip in Q3 Trading & IB Revenues
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As the performance of capital markets continues to be dismal, JPMorgan (JPM - Free Report) expects a marginal decline in trading and investment banking (IB) revenues in the third quarter of 2023.
At the Barclays Financial Services Conference, JPM CEO Jamie Dimon stated that the trading business is projected to be “down 1% or 2%” both year over year and sequentially, while “it's something like that in investment banking” too.
Likewise, Bank of America (BAC - Free Report) offered dismal third-quarter guidance for IB business. Alastair Borthwick, the company’s chief finance officer, said, “I'd say around investment banking, the fee pool is down probably 30% -- 35% right now, pretty significantly down year-over-year. We're not -- I think we'll do slightly better than that, but that's still puts the investment banking fees, which are probably right around $1 billion mark.”
Though the green shoots are visible in IB business, it is too early to say that the situation has reversed. Since 2022, the performance of capital markets has been discouraging. JPMorgan is also not untouched by this. The company’s total IB fees plunged 58% last year and it was down 10% in the first six months of 2023.
Similarly, JPM’s markets revenues have been very volatile over the last several quarters. Even in the first half of 2023, equity markets revenues declined 1% and fixed income markets revenues fell 16%.
These apart, Dimon reaffirmed net interest income (NII) guidance for 2023. He said, “NII, I think we have given your numbers as they haven't really changed that much, you have them, right, whatever they are, they're the same as they were before.” The company projects NII to be roughly $87 billion this year, up 30% year over year.
Also, the company reiterated its expense guidance at approximately $84.5 billion for 2023. Similarly, Truist Financial (TFC - Free Report) and BAC management reaffirmed their non-interest expense outlook.
TFC anticipates current-quarter adjusted expenses to be flat or down 1% sequentially and for the full year, the metric to grow almost 7%. For Bank of America, expenses in the third and fourth quarters of 2023 are projected to be near $15.8 billion and $15.6 billion, respectively.
Further, Dimon called a new regulatory proposal requiring banks to bolster their capital buffers “hugely disappointing.” In late July, long-awaited capital reforms tied to Basel III were revealed. He warned that this could have "unintended consequences" for the U.S. economy and push more lending into the hands of private credit markets.
Shares of JPM have rallied 7.7% so far this year against the industry’s fall of 6.8%.
Image: Bigstock
JPMorgan (JPM) to See 1-2% Dip in Q3 Trading & IB Revenues
As the performance of capital markets continues to be dismal, JPMorgan (JPM - Free Report) expects a marginal decline in trading and investment banking (IB) revenues in the third quarter of 2023.
At the Barclays Financial Services Conference, JPM CEO Jamie Dimon stated that the trading business is projected to be “down 1% or 2%” both year over year and sequentially, while “it's something like that in investment banking” too.
Likewise, Bank of America (BAC - Free Report) offered dismal third-quarter guidance for IB business. Alastair Borthwick, the company’s chief finance officer, said, “I'd say around investment banking, the fee pool is down probably 30% -- 35% right now, pretty significantly down year-over-year. We're not -- I think we'll do slightly better than that, but that's still puts the investment banking fees, which are probably right around $1 billion mark.”
Though the green shoots are visible in IB business, it is too early to say that the situation has reversed. Since 2022, the performance of capital markets has been discouraging. JPMorgan is also not untouched by this. The company’s total IB fees plunged 58% last year and it was down 10% in the first six months of 2023.
Similarly, JPM’s markets revenues have been very volatile over the last several quarters. Even in the first half of 2023, equity markets revenues declined 1% and fixed income markets revenues fell 16%.
These apart, Dimon reaffirmed net interest income (NII) guidance for 2023. He said, “NII, I think we have given your numbers as they haven't really changed that much, you have them, right, whatever they are, they're the same as they were before.” The company projects NII to be roughly $87 billion this year, up 30% year over year.
Also, the company reiterated its expense guidance at approximately $84.5 billion for 2023. Similarly, Truist Financial (TFC - Free Report) and BAC management reaffirmed their non-interest expense outlook.
TFC anticipates current-quarter adjusted expenses to be flat or down 1% sequentially and for the full year, the metric to grow almost 7%. For Bank of America, expenses in the third and fourth quarters of 2023 are projected to be near $15.8 billion and $15.6 billion, respectively.
Further, Dimon called a new regulatory proposal requiring banks to bolster their capital buffers “hugely disappointing.” In late July, long-awaited capital reforms tied to Basel III were revealed. He warned that this could have "unintended consequences" for the U.S. economy and push more lending into the hands of private credit markets.
Shares of JPM have rallied 7.7% so far this year against the industry’s fall of 6.8%.
Image Source: Zacks Investment Research
Currently, JPMorgan sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.