By Saeed Azhar, Manya Saini and Nupur Anand
NEW YORK, July 14 (Reuters) – Wall Street bank earnings powered ahead in the second quarter with a strong lift from fees for advising on mergers and acquisitions and surging trading revenue, but some banks warned about risks ahead to the economy and markets.
Investment banking has been a strong area of revenue growth for banks, with mega equity offerings and multibillion-dollar transactions signaling the most bullish dealmaking environment in years. Trading continues to be strong with higher-than-usual volatility due to geopolitical conflict and uncertainty surrounding AI disruption. The SpaceX initial public offering gave a boost as banks on the SpaceX IPO raked in around $500 million in fees.
“We’ve had really terrific global markets performance and investment banking performances,” said Bank of America Chief Financial Officer Alastair Borthwick on the bank’s media call. “Business continues to feel good.”
Bank of America beat estimates for second-quarter profit, benefiting from record trading activity and a surge in dealmaking, one of five banks reporting on Tuesday.
JPMorgan Chase reported a similar theme. Big-ticket IPOs and dealmaking helped drive investment banking fees to their highest levels since 2021, while stock traders capitalized on volatile markets. The bank’s profit was the highest ever posted by a U.S. bank in a quarter and its market value is now more than $920 billion, edging the lender closer to Wall Street’s elite trillion-dollar club.
“What’s going on in equities is a booming environment with a ton of activity, big IPOs, the AI theme, a very active environment,” said JPMorgan CFO Jeremy Barnum on the bank’s media call.
‘BOOMING ENVIRONMENT’
Analysts and investors said they were surprised by the strength of the earnings.
“I’m a little bit surprised by the magnitude of the beats,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management, who manages portfolios that hold shares of Bank of America and JPMorgan.
Goldman Sachs exceeded second-quarter profit expectations, Wells Fargo beat Wall Street estimates for second-quarter profit, and Citigroup reported a 45% jump in second-quarter profit and its highest quarterly revenue in a decade. Morgan Stanley will report second-quarter results on Wednesday.
“The biggest beats were coming from investment banking, capital markets, and trading,” said Neville Javeri, portfolio manager at Allspring Global Investments, pointing to Goldman and JPMorgan as particular beneficiaries. Javeri, who manages funds that are overweight bank stocks, including holdings in JPMorgan, Citi added that “capital markets and investment banking have sort of been the drivers for all the banks.”
Global investment banking revenue hit $61.4 billion in the first half of 2026, a 24% jump from a year earlier, according to Dealogic data. JPMorgan remained the global leader in investment banking revenue, while Goldman Sachs was the global leader in advising on M&A.
Chip designer Cerebras’ $6.4 billion IPO and Google-parent Alphabet’s $85 billion share sale were also among the top deals in the second quarter.
“We thought the (second quarter) earnings were going to be very good, but they turned out to be extraordinary,” said Macrae Sykes, portfolio manager at GABF ETF, Gabelli Funds. “We continue to believe the environment for the major banks is very constructive due to business activity, market engagement and demand for capital with average loans up around 10%.”
Bank shares were mixed. JPMorgan rose 1.7%, BofA gained 1.8% and Goldman jumped 7.3%, however Citi lost 4.3% and Wells Fargo dropped 2.6%. Citi’s shares were hurt by investors worries about potentially worse results in the second half due to a rise in expenses.
“It’s the best bank set up in years,” said Lauren Cassidy, Chief Investment Officer for the Founders 100 ETF. “And this is an unusual quarter. Everything’s working.”
CAUTION AND RISKS
Still, there were notes of caution about markets.
“How fragile/dangerous/overheated/exuberant is the current moment?” asked JPMorgan’s Barnum, pointing to nominal leverage numbers and valuations being “quite high.”
“It would be naive not to be worried – but it’s easy to be worried and the market keeps going up,” he said.
Citi CFO Gonzalo Luchetti said conflict in the Middle East may affect deal activity over time, although the pipeline remains strong.
JPMorgan CEO Jamie Dimon said in the bank’s press release that “several risks are shifting below the surface like tectonic plates, including geopolitical tensions and wars, sticky inflation, large global fiscal deficits and elevated asset prices,” adding “they could also cause meaningful disruptions when they shift or collide.”
BofA CEO Brian Moynihan also pointed to risks, saying while the U.S. economy has proved more durable than expected “inflation and tighter monetary policy remain key risks.”
Wells Fargo CEO Charlie Scharf also sounded a note of caution.
“Strong environments like this don’t last forever, and we see large amounts of capital being deployed by both banks and non-banks across a broad range of risk assets,” said Scharf.
(Saeed Azhar, Tatiana Bautzer, Nupur Anand, Lewis Krauskopf and Saqib Iqbal Ahmed in New York, Nivedita Balu in Toronto and Niket Nishant, Manya Saini, Utkarsh Shetti, Arasu Basil and Pritam Biswas in Bengaluru; Writing by Megan Davies; Editing by Rod Nickel and Nick Zieminski)
Comments