JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corporation (NYSE:NYSE:BAC) have projected a decline in their trading and investment banking (IB) revenues for the third quarter of 2023, amid dismal performance in capital markets. The announcement was made at the Barclays (LON:BARC) Financial Services Conference on Tuesday.
Jamie Dimon, JPMorgan's CEO, stated that the trading business is expected to be "down 1% or 2%" both year over year and sequentially, a trend mirrored in investment banking. The bank's total IB fees dropped by 58% last year and were down 10% in the first half of 2023.
Similarly, Alastair Borthwick, Bank of America's CFO, indicated that the fee pool for investment banking is currently down by approximately 30-35%. However, he expects the bank's performance to be slightly better than this estimate.
The weak performance of capital markets has been ongoing since 2022. Despite the visible signs of recovery in the IB business, it remains too early to declare a complete turnaround.
In addition to these projections, both banks reaffirmed their guidance for net interest income (NII) and non-interest expenses for 2023. JPMorgan anticipates its NII to be around $87 billion, a 30% increase year over year, with projected expenses at approximately $84.5 billion.
Bank of America expects its third-quarter NII to be at the same level as the second quarter ($14.2-$14.3 billion), whereas the fourth-quarter NII is expected to be $14 billion. The company projects expenses for the third and fourth quarters of 2023 to be near $15.8 billion and $15.6 billion, respectively.
Truist Financial (NYSE:NYSE:TFC) also reaffirmed its non-interest expense outlook. The bank anticipates current-quarter adjusted expenses to be flat or down 1% sequentially and for the full year, the metric is expected to grow almost 7%.
Dimon expressed disappointment over a new regulatory proposal requiring banks to increase their capital buffers, warning of "unintended consequences" for the U.S. economy and a potential shift in lending towards private credit markets.
Despite the challenging environment, JPMorgan's shares have rallied 7.7% so far this year, contrasting with the industry's fall of 6.8%.
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