Trading rebound boosts JP Morgan profits

JP Morgan glass sign

JP Morgan opened the second-quarter earnings season for Wall Street’s biggest investment banks

The Wall Street bank opened the US quarterly reporting season on July 14. Its results cover the three months to June 30, a period that began with hopes of a turnaround from a slow start to the year and ended amid the aftermath of the UK’s vote to leave the European Union.

Fixed income trading revenues surged by 35% year-on-year during the second quarter, reaching just shy of $ 4 billion, with the bank citing a “strong performance in rates and currencies, and emerging markets, on higher client flows as well as improved performance in credit and securitised products driven by better market conditions.”

Equity trading revenues edged up 2% to $ 1.6 billion.

Both equities and fixed income delivered their best quarterly performance since the first three months of 2015, and took total trading revenues 23% higher than a year earlier. At the end of the first quarter of 2016, combined fixed-income and equity markets revenues had been down 11% on their 2015 level.

The bank’s advisory revenues were flat at $ 466 million. Revenues from both debt and equity underwriting fell year-on-year – equity plummeting 37% to $ 285 million – but rose from their first-quarter performance. That left total investment banking fees across advisory and underwriting activities at $ 1.6 billion, down by 10% year-on-year and up 24% quarter-on-quarter.

Across the corporate and investment bank – which also houses JP Morgan’s treasury services, lending and securities services activities – revenues for the three months were $ 9.2 billion, up by 5% from a year earlier and also the bank’s best quarter since the first three months of 2015. Profit, at $ 2.5 billion, was also the highest for any quarter since then.

Bankers have expected the UK’s vote to leave the European Union to stymie dealmaking, particularly in the equity capital markets. Questions around the effect on passporting rules that allow banks to sell products and services from their regional London headquarters across Europe also mean that banks may have to move staff.

JP Morgan chairman and chief executive Jamie Dimon had previously said that “the location of some roles” at JP Morgan may need to move “in the months ahead”.

Dimon addressed the Brexit topic on the bank’s earnings call, saying that it would “create uncertainty for an extended time period” and that all parties involved would need “time to adjust to the new reality”. He added that he hoped that political leaders negotiating the UK’s exit from the EU would be “sensible”.

He said the bank would shoulder any increased costs of doing business in particular countries that might come as a result of Brexit. he said: “We’re not going to pull back on serving people in Italy, Germany, France, UK or Spain because it might lead to higher costs. I would accept the higher costs, as opposed to disrupt our clients.”

UPDATED: This story was updated to include Jamie Dimon’s comments from the quarterly earnings call

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