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In Q1, the big banks brought in record profits from trading as investors, spooked by volatility, rushed to make changes to their portfolios. In Q2, the banks still made, well, bank, though trading was less frenzied. Consumers are hanging in there, bank leaders said during earnings calls, and deals may be returning.
JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley all beat analysts’ expectations for both revenue and earnings per share in the most recent quarter. Bank of America was the only major US bank to miss expectations for revenue in Q2; even so, it notched its second-highest top-line revenue ever.
Riding the rapids: Q2 kicked off with April 2’s “Liberation Day” tariffs, but within a few weeks’ time, businesses and consumers seemed to adapt, executives said. Ted Pick, CEO of Morgan Stanley, observed, per Reuters, that “the second quarter unfolded with two distinct halves. The first half began with uncertainty and market volatility associated with the US trade policy, and the second half ended with increasing engagement and a steady rebound in capital markets.”
Goldman Sachs CEO David Solomon likewise noted in a press release that “[a]t this time, the economy and markets are generally responding positively to the evolving policy environment.” And Citi CFO Mark Mason said that market participants have had “more growing familiarity with how to deal with uncertainty and volatility and the impact of tariffs,” Reuters reported. (TACOs, anyone?)
Trading remained robust in Q2. Morgan Stanley’s stock traders, for instance, came close to breaking records for second-quarter trading fees. Its equity trading revenue was up 23% year over year.
Citi’s traders had their “best second quarter in five years,” Bloomberg reported. “Volatility is going to, I suspect, be a feature, not a bug, of the new world order, and we will benefit from that,” Citigroup CEO Jane Fraser said, per CNBC.
Deals returning? In the first half, companies held back on dealmaking due to uncertainty, but they may be regaining their appetite for M&As. JPMorgan, Wells Fargo, and Citi all saw I-bank fees rise, due in part to growth in deals.
“Most of these companies are just ready to get on with it,” Sharon Yeshaya, CFO of Morgan Stanley, told Bloomberg. “You saw very high receptivity to IPOs.”
Consumers still spending: Bank leaders also said they’re not seeing signs of a consumer slowdown.
“Consumers remained resilient, with healthy spending and asset quality, and commercial borrower utilization rates rose,” BoA CEO Brian Moynihan said in an earnings report. JPMorgan CFO Jeremy Barnum said on an earnings call that “the consumer basically seems to be fine,” and that “in a world with 4.1% unemployment rate, it’s just going to be hard, especially in our portfolio, to see a lot of weakness.”