JPMorgan Forecasts Strong Q3 Fees as Rivals Signal Slowdown

JPMorgan Chase (JPM) shares rose more than 1% on Tuesday after co-president Doug Petno projected that the firm’s investment banking and trading fees will increase by the mid-to-high teens year over year in the third quarter. Petno, who leads the commercial and investment bank, stated that clients are moving past market volatility and uncertainty, allowing the bank to capitalize on ongoing capital markets activity. This forecast positions JPMorgan at the bullish end of the sector, diverging from more cautious peers who anticipate a deceleration following an unusually strong first half driven by AI-related capital flows and supply chain repositioning.

The optimism from JPMorgan helped lift other Wall Street bank stocks, including Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, and Wells Fargo, which had pared earlier losses. However, the broader sector backdrop has become less euphoric since a sharp unwind in the global AI trade in July and a subsequent decline in US stocks from mid-August. Global dealmaking volume has slowed, leading many executives to temper expectations for the remainder of the year, with some noting that the third quarter is unlikely to match the performance of the second.

Rivals Cite Slowing Dealmaking Volumes

Morgan Stanley co-president Daniel Simkowitz acknowledged that the third quarter will not replicate the second quarter’s results, citing the current market environment. Despite this, the bank remains optimistic about the longer-term deal pipeline, with bankers anticipating further mega-deals such as the planned public offering from Anthropic later this fall. Similarly, Wells Fargo’s CFO Mike Santomassimo expects both investment banking fees and markets revenue to grow by roughly mid-single digits year over year, reflecting a more modest outlook compared to JPMorgan’s high-teens projection.

Citigroup’s CFO Gonzalo Luchetti indicated that the third quarter outlook for dealmaking and trading fees is on pace for mid-single-digit and low-single-digit growth, respectively. This consensus of moderate growth stands in contrast to the high-teens increase projected by JPMorgan. The divergence highlights varying assessments of how much momentum remains in capital markets after the summer slowdown, with JPMorgan expecting its clients to continue transacting despite broader market headwinds.

Bank of America Forecasts Fee Decline

Bank of America presented the most cautious outlook among major peers, with CEO Brian Moynihan projecting investment banking fees of $1.6 billion to $1.8 billion for the third quarter. This represents a decline of 10% to 20% from the $2 billion earned in the same period last year. Moynihan also noted that the sales and trading business is poised to be flat year over year, a downshift that could make positive operating leverage difficult to achieve in the quarter. This forecast contributed to a drop of more than 5% in big bank stocks on Monday, highlighting the sensitivity of investor sentiment to fee-related guidance.

Market Reaction Diverges on Guidance

The contrasting forecasts from JPMorgan and Bank of America underscore the current split in the banking sector’s outlook. While JPMorgan’s Petno emphasized client activity and resilience through uncertainty, Bank of America’s Moynihan highlighted the challenges of maintaining fee growth in a slowing market. According to GN stocks/banks, the market is closely watching how these divergent views play out, with JPMorgan’s strong forecast providing a relative safe harbor for investors seeking exposure to investment banking revenue. The next few weeks will be critical in determining whether the sector-wide slowdown predicted by rivals materializes or if JPMorgan’s bullish assessment proves representative.