JPMorgan Chase: Market Services and Trading Slow as Expected
Corporate and investment banking
JPMorgan Chase (JPM) posted net revenues of $8.89 billion for its corporate and investment banking division in 2Q17, compared to $9.17 billion in 2Q16 and $9.54 billion in 1Q17. The division’s banking revenues expanded 17% to $3.12 billion, helped by investment banking and treasury revenues. The banking giant continued to rank first in global investment banking fees for 2Q17 compared with peers like Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS). CIB division’s treasury revenues benefited from higher rates and operating deposits.
CIB’s investment banking revenue climbed on equity, debt underwriting, and advisory on strategic transactions. JPMorgan advises companies on fundraising, strategic transactions including mergers, and trading activities under its CIB division.
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Market and Investor Services
Commercial and investment banks (XLF) had hinted at lower trading revenues in 2Q17. CIB’s market and investor services revenues fell 11% on a year-over-year basis as well as sequentially. The decline was driven by 19% lower revenues from fixed income markets to $3.2 billion, mainly due to lower flows, volatility, and a tighter spread compared with the prior year. The decline was mainly offset by an 8% rise in securities market revenues of $982 million.
CIB’s expenses fell 5% on a year-over-year basis to $4.8 billion, mainly due to lower employee compensation—which was driven by lower revenue growth. The lower expenses and credit costs benefit of $53 million helped the division with an 9% increase in net income to $2.7 billion. The division managed a 15% return on equity, reflecting high operating margins.