JPMorgan hit by slowdown in investment banking momentum, shares slip

JPMorgan Chase’s JPM-N profit rose in the third quarter, driven by investment banking and trading performance, but its shares fell 3 per cent in premarket trading as a recent slowdown in deal-making raised concerns about future growth.

Wall Street’s deal-makers had a cracking start to the year, highlighted by the historic listing of Elon Musk’s SpaceX. But the IPO market has lost steam in recent weeks, threatening what could have been a banner year for the investment banking business.

JPMorgan reported an 8-per-cent decline in investment banking fees versus the second quarter even as it recorded a 14-per-cent rise compared with a year earlier.

“Investment banking fees each rose at a mid-teens rate, helped by strong levels of client activity, although activity did moderate somewhat during the quarter,” CEO Jamie Dimon said in a statement.

Analysts say the IPO market is selective, not shut, and delayed offerings could still launch if conditions stabilize during the fourth quarter. Banks earn lucrative fees from underwriting the initial offering, as well as from subsequent follow-on sales as companies issue more shares.

The bank has retained its crown as the top earner of investment banking revenue, according to Dealogic data.

Wall Street’s trading desks have enjoyed a strong year, with JPMorgan extending its winning streak as market volatility driven by uncertainty over global interest rates and surging energy prices boosted trading activity.

Revenue at JPMorgan’s markets division, which houses its equity and fixed-income trading desks, climbed 15 per cent in the third quarter from the prior year.

The U.S. banking giant on Tuesday posted net income of US$15.3-billion, or US$5.57 per share, for the three months ended Sept. 30, compared with US$14.4-billion, or US$5.07 per share, a year earlier.

Consumer banking boost

The U.S. economy has so far defied expectations as the labour market has held up and consumer spending remains healthy, keeping the industry’s crucial lending business churning.

Net interest income, excluding markets – the difference between what a bank earns off loans and pays out on deposits – increased 6 per cent in the quarter to US$24.7-billion. Average loans rose 10 per cent year-over-year.

“The U.S. economy continued to be fuelled by strong business investment and ongoing consumer spending,” Dimon said.

Loan growth has come into sharper focus after the Federal Reserve hiked interest rates for the first time since 2023 in September, with hawkish signals of more possible tightening ahead.

That, combined with a spike in bond yields, has the potential to push borrowers out of the credit market as they navigate higher borrowing costs and tighter financial conditions.