IPOs and stock trading lift big banks’ revenues

The big banks may want to send Elon Musk (and SpaceX CFO Bret Johnsen) a fruit basket.

The nation’s largest lenders posted strong—and in some cases, record-breaking—returns in the second quarter, and IPOs like SpaceX’s $2 trillion launch were a major reason.

JPMorgan Chase, Bank of America (BofA), Wells Fargo, Goldman Sachs, and Citi all worked on the SpaceX IPO in some capacity. The banks also advised on or underwrote some other major deals in a quarter chockablock with them, including the $67 billion NextEra-Dominion Energy merger (JPMorgan, BofA, Wells Fargo), Alphabet’s $85 billion equity raise (JPMorgan, Goldman), the $44.8 billion Unilever-McCormick merger (Citi), and Apollo’s $35 billion financing deal with Anthropic (Wells Fargo).

The banks raked in the fees—Goldman’s equities underwriting revenue rose an eye-watering 130% YoY last quarter, while BofA’s investment banking fees were up 50% and Citi’s 44%. JPMorgan Chase’s rose 30%, which CEO Jamie Dimon said in a statement were at “the highest level since 2021.”

In fact, JPMorgan Chase’s overall profits rose 41% for the quarter to $21.2 billion, a new high for a US bank.

The boom times are expected to continue. Goldman said it was experiencing its highest level of deals backlog in five years.

“The $2.5 trillion in announced global M&A in the first half of the year is the gift ​that will keep giving, with banks getting paid as deals close over the next 6–9 months, while the mega-IPO pipeline remains ​intact for the back ⁠half of the year,” analyst Stephen Biggar of Argus Research told Reuters.

Market volatility due to factors such as geopolitical tension, oil prices, and uncertainty around interest rates drove a high volume of trading this quarter, and the largest banks saw large gains there, too. Goldman beat its own record with a 72% jump in stock trading revenue, the third consecutive quarter that Goldman’s equities unit “set an all-time record for any bank,” Bloomberg reported.

What about Main Street? US consumers are still proving resilient, bank executives said. The “economy is running fine right now,” BofA CEO Brian Moynihan told CNBC. Inflation is slowly “trailing down” and likely won’t ease until 2028, he said. And consumers are adapting to high gas prices, he told CNBC’s Squawk on the Street. “Overall, consumers adjusted to that and spent,” he said. “And if you look at the lower income third of the households, you’re actually seeing the wage growth.”

Wells Fargo chairman and CEO Charlie Scharf observed that consumer checking accounts, new credit card accounts, and new auto loans are all growing. “We are clearly benefiting from the broad-based economic strength we see in the US,” he said in the bank’s earnings release.

Dimon noted in a statement that “the US economy has demonstrated notable resiliency this year, with stronger business investment and hiring,” though he observed some risks to watch, such as “geopolitical tensions and wars, sticky inflation, large global fiscal deficits, and elevated asset prices.”