Breakingviews - Investment bankers wait for the axe to fall

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JPMorgan and Morgan Stanley reported big drops in their dealmaking revenue. Fees halved, year-on-year, and the trading boost that offset them isn’t reliable. Banks aren’t yet talking about lay-offs, but such painful trade-offs look inevitable. johnsfoley

, where the run-rate of $6.6 billion in annual investment banking revenue pales next to 2019’s $7.6 billion.

So far, the slump has been more than offset by lively markets. Revenue from flipping stocks and bonds rose 15% at JPMorgan in the second quarter, year-on-year, and over 20% at Morgan Stanley, towering over shrunken deal fees. Trading and investment banking sit in the same divisions at both firms. But revenue derived from shifting securities is likely to go back roughly to where it was, especially as volatility in the bond market subsides.

Banks may be kind even if things don’t improve. With other parts of the business doing well, there’s still enough to go around. JPMorgan raised its estimate of how much it will make in interest on its lending activities on Thursday. Morgan Stanley has a wealth business that’s still generating a healthy profit. But it’s unlikely those divisions will want to subsidize dealmaking colleagues for long, despite the rainmakers’ efforts in happier times.

 

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