JPMorgan Chase’s (JPM) second-quarter profit surged thanks to a one-time accounting boost and a rally on Wall Street. But another decline in a key source of revenue underscores the challenges facing even the largest U.S. bank.
Net income of $18 billion was up 25% from the same period a year ago, largely thanks to a share swap in credit card giant Visa (V), which generated about $8 billion in profit. Excluding those gains, JPMorgan earned $13.1 billion in the quarter.
Investment banking results beat analysts’ expectations, as fees from that business rose 50% from a year ago and 17% from the previous quarter to $2.35 billion. Mergers and acquisitions revenue rose to $785 million, the highest level since the third quarter of 2022.
These numbers bode well for other large institutions with sizeable investment banking operations, such as Goldman Sachs (GS) and Morgan Stanley (MS).
But there were also fresh signs that even JPMorgan is struggling to maintain its extraordinary performance during a prolonged period of high interest rates, high deposit costs and weak credit demand.
A key measure of lending profits, net interest income, fell 1% for the second quarter in a row.
JPMorgan, however, is sticking to its full-year net interest income forecast of $91 billion, excluding trading revenue. That would represent a 2% increase over the net interest income it brought in last year.
Shares of JPMorgan fell more than 1% in pre-market trading.
Jamie Dimon, CEO of JPMorgan, said: “While market valuations and credit spreads appear to reflect a fairly favorable economic outlook, we remain vigilant about potential tail risks,” citing geopolitical tensions and ongoing inflationary forces.
“Inflation and interest rates may remain higher than the market expects,” he said.
JPMorgan’s results kicked off a new earnings season for the U.S. banking sector, as lenders looked to prove their resilience despite uncertainty over the U.S. economy, the path of monetary policy and the unknown outcome of this fall’s presidential election.
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