At the beginning of the Covid-19 pandemic, when trading revenue plummeted from record levels, JPMorgan Chase and Goldman Sachs were benefiting from the boom in trading activity.

Two Wall Street banks reported on Tuesday that consulting fees for corporate acquisitions and initial public offerings surged in the second quarter, helping to offset the decline in bond and stock trading returns.

JPMorgan Chase announced Record global investment banking fees of US$3.6 billion, while Goldman Sachs fees The US$3.6 billion is only slightly lower than the record of US$3.7 billion in the first three months of 2021.

Goldman Sachs chief executive David Solomon said the bank is ready for a record backlog of transactions, which is a sign of more mergers and acquisitions in the future. He said that this prosperity is driven by the CEO’s desire for scale and confidence in recovery, as well as the company’s drive to digitize its business.

“Obviously, if there is some kind of interruption or economic slowdown at some point in the future, it will weaken and slow down confidence, but given where we are today, this seems unlikely,” Solomon told analysts on Tuesday.

Jeremy Barnum, chief financial officer of JPMorgan Chase, responded to his comments. “Looking forward to the third quarter, the pipeline is still very strong,” he said. “We expect M&A activity and the IPO market to remain active.”

One potential obstacle to M&A activity is Executive order It was signed by President Joe Biden last week, urging to strengthen the enforcement of US antitrust laws.

Solomon said: “We will follow it very closely and do a lot of work to understand how this all develops with the institution.” “Of course, I think the tilt of the balance may have some impact on some transactions to a certain extent.”

Overall, JPMorgan Chase’s net income exceeds Doubled This quarter increased to US$11.9 billion, as the US$3 billion provision for potential credit losses caused mixed results. Revenue fell by 8% due to losses due to falling interest rates, sluggish loan demand and slowing transactions.

Goldman Sachs The company said its revenue increased by 16% to $15.4 billion, which surprised analysts who had previously expected a decline, reflecting the strong performance of its asset management department and strong transaction revenue.

Mitsubishi UFJ Financial Group’s global financial institution group co-head Mark Doctoroff (Mark Doctoroff) said that the economic impact of the lowest interest rate and the quantitative easing program has contributed to the trading frenzy.

Bar chart showing Goldman Sachs investment banking and transaction fees

But he said that these macroeconomic factors have also brought resistance to banks’ lending business, adding that the boost from investment banking may fade, especially as interest rates rise.

“Now you can balance through mergers and acquisitions,” he said. “This is not a normal activity. Many things may reverse on their own, but it is not a bad thing.”

Analysts said that in addition to M&A expenses, banks can also profit from subsequent transactions in areas such as acquisition financing and hedging.

“Investment banking expenses in the first half of this year hit a record high. We expect interim results to remain quite strong,” said Jason Goldberg, an analyst at Barclays Bank.

According to data from Refinitiv, Goldman Sachs is the bank with the highest income in mergers and acquisitions in the first six months of 2020, and JPMorgan Chase ranks second. Among global IPOs, JP Morgan Chase is the company with the highest income, and Goldman Sachs ranks third.

Royal Bank of Canada Capital Markets analyst Gerard Cassidy (Gerard Cassidy) said: “Both companies, especially Goldman Sachs, have announced very strong investment banking fees relative to expectations and earlier periods.” The channels for consulting fees seem to be very powerful.”

In New York midday trading, Goldman Sachs shares fell about 1.3%, while JPMorgan Chase shares fell 2.6%. Wall Street rival Morgan Stanley announced its earnings on Thursday.

Additional report by Eric Platt in New York


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