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Globe and Mail
2 days ago
- Business
- Globe and Mail
Capital Markets Bounce Back: What This Means for JPMorgan's Prospects
JPMorgan 's JPM capital markets operations, housed in its Commercial & Investment Bank (CIB) segment, are a core earnings driver, contributing roughly 40% of total net revenues. The segment's performance is highly correlated with deal-making momentum, trading activity and overall market conditions, making it a key beneficiary of a sustained capital markets revival. After a slowdown in 2022 and 2023 due to geopolitical tensions, recession fears and inflationary pressures, the capital markets staged a notable rebound last year. JPMorgan's investment banking (IB) fees within the CIB surged 36% year over year, reflecting improved underwriting volumes and advisory mandates, while markets revenues rose 7% on elevated volatility and trading demand. Importantly, the bank retained its #1 position in global IB fees, underscoring its competitive strength and client franchise depth even in challenging conditions. While early 2025 saw mixed sentiment, with optimism tempered by tariff-driven policy shocks, deal-making has regained momentum. JPMorgan captured an 8.9% IB wallet share in the first half of 2025, with IB fee growth expected to continue at a steady pace. This sustained uptrend in IB fees should provide a stable growth anchor for the CIB segment, as corporates re-enter equity and debt markets for capital raising and strategic transactions. On the trading side, markets revenues have historically been more volatile, swinging with macro uncertainty and client risk appetite. Hence, heightened geopolitical tensions, tariff-related uncertainty and episodic volatility in 2025 have spurred client hedging and trading needs, supporting revenue growth in the first half of the year. While structural normalization in trading activity is inevitable over time, JPMorgan's broad product coverage across fixed income, currencies, commodities and equities positions it to capture upside during volatility spikes. The revival of capital markets provides JPMorgan with a dual tailwind: a steady lift from the recovery in deal-making and opportunistic boosts from trading in periods of market dislocation. Given its leading market share, diversified capabilities and global reach, the bank is well-positioned to translate this cyclical upswing into sustained earnings momentum over time. How JPMorgan Stacks Up Against Peers in Capital Markets Similar to JPM, Bank of America BAC witnessed subdued IB performance in 2022 and 2023, with revival happening last year. In 2024, the company's IB fees soared 31% year over year. Then, in the first six months of 2025, Bank of America's IB fees declined on a year-over-year basis on muted industry-wide trends. Coming to the trading business, Bank of America's sales and trading revenues have been increasing since 2022 (the metric increased 13% year over year in the first half of 2025). Yet, the volatile nature of the business and expectations that it will gradually normalize toward the pre-pandemic level are likely to make growth in the same challenging. Another key peer, Morgan Stanley MS, leans heavily on the IB business to sustain profitability, with IB revenues jumping 36% last year after plunging in 2023 and 2022. But performance of the company's IB business has been subdued this year, with the metric rising just 1% from the prior-year quarter. Nonetheless, Morgan Stanley remains cautiously optimistic about the performance of the IB business, supported by a stable and diversified M&A pipeline. Also, Morgan Stanley's trading business performance has been stellar over the past several quarters, attributable to uncertainty surrounding the tariff plans and macroeconomic headwinds. As market volatility and client activity are expected to remain decent, the company's trading business will likely continue to grow. JPMorgan's Price Performance, Valuation and Estimates JPMorgan's shares have soared 21.2% this year, outperforming the S&P 500 Index's gain of 9.5%. From a valuation standpoint, JPM trades at a 12-month trailing price-to-tangible book (P/TB) of 2.98X, above the industry average. P/TB Ratio Image Source: Zacks Investment Research The Zacks Consensus Estimate for JPMorgan's 2025 earnings implies a decline of 1.3% on a year-over-year basis, while 2026 earnings are expected to grow at a rate of 4.5%. In the past week, earnings estimates for 2025 and 2026 have moved marginally upward. Earnings Estimates Image Source: Zacks Investment Research JPM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis Report
Globe and Mail
09-06-2025
- Business
- Globe and Mail
Can JPMorgan's IB Division Weather the Near-Term Macro Challenges?
JPMorgan JPM remains a top player in investment banking (IB), ranking #1 in global IB fees. In 2024, the company's total IB fees soared 37% to $8.91 billion after declining in 2023 and 2022. Despite tariff-related ambiguity and extreme market volatility, momentum persisted in the first quarter of 2025. In the quarter, IB fees grew 12% year over year to $2.18 billion, fueled by strong advisory and debt underwriting activity. The near-term IB prospects are cloudy due to market turmoil and ambiguity over monetary policy. Jeremy Barnum, JPM's chief financial officer, during the first-quarter earnings conference call, said, 'In light of market conditions, we are adopting a cautious stance on the investment banking outlook. While client engagement and dialogue is quite elevated, both the conversion of the existing pipeline and origination of new activity will require a reduction in the current levels of uncertainty.' Additionally, during the Investor Day conference in May, Troy Rohrbaugh, co-CEO of the Commercial & Investment Bank (CIB) segment, noted that economic uncertainty is expected to hurt JPM's IB business in the second quarter, as deal-making activities have largely stalled. IB fees are expected to be down in the mid-teens range on a year-over-year basis. In the second quarter of 2024, IB fees in the CIB segment were $2.46 billion. Despite these challenges, JPMorgan's long-term outlook for the IB business remains strong, driven by a healthy IB pipeline and an active mergers and acquisitions (M&As) market as well as its leadership position in the business. For IB fees, we estimate a CAGR of 2.2% by 2027. How are JPM's Peers Coping With Near-Term IB Headwinds? Not only JPMorgan, other IB firms like Morgan Stanle y MS and Goldman Sachs GS are facing similar challenges. While Morgan Stanley is diversifying beyond IB to build a more balanced revenue mix, IB remains a key top-line driver. After a steep decline in 2022–2023, IB revenues rebounded 36% in 2024 to $6.71 billion and rose another 8% in the first quarter of 2025. With a stable and diversified M&A pipeline, Morgan Stanley remains cautiously optimistic, positioning itself to benefit once macroeconomic conditions improve. Goldman continues to dominate the IB business and maintains its long-standing top position in announced and completed M&As. This underscores its enduring strength in the IB business despite broader headwinds in the sector. Like its competitors, JPM and Morgan Stanley, Goldman also witnessed a decline in the IB fees in 2022 and 2023, before it rebounded last year. Despite an 8% year-over-year fall in IB revenues in the first quarter of 2025, its strong deal pipeline and advisory backlog position it well for a rebound as market conditions improve. JPM's Price Performance, Valuation and Estimates JPMorgan shares have risen 10.8% this year. In contrast, Morgan Stanley has gained 4.8% and Goldman jumped 7.2% in the same time frame. Image Source: Zacks Investment Research From a valuation standpoint, JPM trades at a 12-month trailing price-to-tangible book (P/TB) of 2.81X, slightly below the industry average. P/TB Ratio Image Source: Zacks Investment Research Moreover, the Zacks Consensus Estimate for JPMorgan's 2025 earnings implies a decline of 7% on a year-over-year basis, while 2026 earnings are expected to grow at a rate of 5.2%. In the past week, earnings estimates for 2025 and 2026 have moved marginally upward. Earnings Estimates Trend Image Source: Zacks Investment Research JPM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor Stock It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom. With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis Report
