JPMorgan Chase’s investment bankers posted their best quarter ever as a record first half in dealmaking bolstered the bottom line at the nation’s largest bank. But expenses climbed in the second quarter and loan growth remained out of reach.
Fees from advising on mergers and underwriting stocks and bonds soared 25% in the second quarter, smashing analysts’ estimates and boosting net income to $11.9 billion. But noninterest expenses rose 4% from a year earlier, more than analysts expected, and the bank said it plans to spend $1 billion more than it previously predicted.
The report marks the banking industry’s first look into the economic reopening in the U.S. made possible by widespread vaccinations in recent months. Pandemic-induced volatility led to a string of banner quarters on Wall Street trading desks, and while that boom is quieter now, mergers and acquisitions surged in the first six months of 2021.
Adam Crisafulli, an analyst at Vital Knowledge, called the results a “mild disappointment” because the gains relied on investment banking and the release of loan-loss reserves, trends he said were not sustainable.
Loan growth proved elusive, with consumers and businesses still flush with stimulus cash and not yet demanding more financing. JPMorgan’s total loans were flat from a year ago, with loans in the consumer and commercial divisions both down. Executives across the banking industry have cited weak loan demand as evidence that consumers and companies are emerging from lockdown with their finances in order.
The firm released $3 billion in reserves it had previously set aside for bad loans, almost twice as much as analysts had predicted. While that goes straight to the bottom line, Chair and CEO Jamie Dimon downplayed the benefit.
“This quarter we once again benefited from a significant reserve release as the environment continues to improve, but as we have said before, we do not consider these core or recurring profits,” Dimon said Tuesday in a news release.
The firm reported $3.57 billion in investment banking fees, topping analysts’ expectation of $3.1 billion. M&A advisory fees rose 52% to $916 million. Debt underwriting was up 26% to $1.6 billion and equity underwriting gained 9% to $1.1 billion.
The bank’s traders generated $6.8 billion of revenue in the quarter, down 30% from a year earlier but above the $6.4 billion analysts expected.
Tuesday also marks Jeremy Barnum’s first earnings report as chief financial officer. He was named to the post in May as part of JPMorgan’s biggest leadership shake-up in years.
