America’s biggest banks are expected to report sharply higher second-quarter profits driven by a surge in activity as clients raced to rearrange portfolios in response to President Trump’s shifting trade policies.
JPMorgan Chase, Citigroup, Goldman Sachs and Bank of America are together expected to post about $26.4 billion in revenues from equities and fixed income trading when they report earnings next week. The anticipated results would be up 11 per cent on the previous year, according to analysis of Factset data.
“I think it’ll be a good quarter,” said Saul Martinez, banking analyst at HSBC. “There may be some upside to estimates and upside to some of the guidance figures that the banks gave, and it certainly feels like on the equity side, there’s still good momentum.”
He added: “I do think you know the results in this quarter and last quarter do raise questions about the sustainability of this kind of sales and trading.”
“Anybody that’s in the market-making business, providing people with instantaneous liquidity, is going to benefit,” said one senior Wall Street executive. “Stocks went down, bonds went down, and the currency went down, and we just saw derisking.”
Market volatility has been bad for mergers and acquisitions and IPOs. The escalating trade war and geopolitical tensions in April drove deal-making to a 20-year low. However, improving sentiment about the impact of tariffs on the US economy has supported a revival in dealmaking in the second half of the quarter.
“Capital market opportunity and activity levels are improving industrywide,” John Waldron, president of Goldman Sachs, said. He expected that if the present economic environment continues, in the autumn there would be “a lot of IPO activity” as well as M&A activity for transactions above $500 million.
Betsy Graseck, a banking analyst at Morgan Stanley, said: “We expect second-quarter investment banking revenues to be better than expected and management teams to point to pipelines building.”
JP Morgan, Citi and Wells Fargo are the first to report results on July 15, followed by Goldman, Bank of America and Morgan Stanley on July 16.
Investors will also be watching for whether the banks will increase the level of share buybacks and dividends after major lenders passed the Federal Reserve’s annual stress test last month.
