JP Morgan is expecting volatility from the trade war unleased in April to drag down investment banking revenues in the second quarter but to boost trading.

Investment banking fees in the April–June quarter are on track to be down “mid-teens [percent] – plus or minus” compared with a year earlier, depending on how the remainder of the quarter plays out, said Troy Rohrbaugh, co-CEO for the commercial and investment bank.

That’s a very different outcome than most expected coming into 2025, when investors and bankers foresaw investment banking fees surging throughout the year.

“Clients entered the year very bullish, expecting a pro-growth, pro-business, deregulatory environment, maybe some more big M&A,” said CIB co-CEO Doug Petno, also speaking at the bank’s annual investor day. “When they started to see some flashing yellows, flagging red signs, and a slowdown in the economy, many tapped the brake."

Petno added: “And then with the events of April, everybody put everything on hold. The typical client’s got their foot on the brake at the moment.”

He said almost every input variable in capital budget or valuing a company, interest rates, discount rates, currencies and taxes had yet to be determined.

“All those puzzle pieces have to come together,” Petno said. So, the typical client is taking a wait-and-see attitude.

And while US president Donald Trump’s tariff policy may have ratcheted up uncertainty, tariffs were only one part of it, he said. The US Federal Reserve as well as other central banks had been trying to engineer a soft landing for the last couple of years. A bigger part of the uncertainty was what kind of landing there would be in the US and globally, Petno said.

The uncertainty that has cast a pall over investment banking is boosting trading revenues, however.

Trading markets have been performing at peak levels for years now and rather than reverting to pre-Covid levels, Rohrbaugh expects current levels may be the new normal. He said the bank’s markets group had a strong start to the quarter, but trading has cooled as volatility has moderated.

JP Morgan's trading revenue should be up “in the mid- to high single digits” percent year-on-year, Rohrbaugh said.

“Keep in mind for both markets and investment banking, we're operating in a very uncertain market, which makes forecasting difficult,” he said.

Deutsche too

Deutsche Bank offered a similar view. Chief executive Christian Sewing told shareholders at its annual general meeting on Thursday that clients were still “holding back” on mergers and acquisitions and IPOs “given the current uncertainty”, but the bank had done well during early April’s market turmoil.

"The second quarter started with a jolt. We have come through this phase of sometimes extreme volatility well, although it remains to be seen how the tariff threat and market events will affect client behaviour,” Sewing said.

Sewing and JP Morgan CEO Jamie Dimon also both flagged that European banks could benefit from the fallout from the tariff and trade war.

Dimon said JP Morgan lost business as non-US clients took a nationalistic stance. “Not that the clients were mad at us,” he said, but in some cases where there was a choice to use a national bank, some clients made that choice. Dimon did not name names but suggested those clients were on both sides of the Atlantic, in Canada and Europe. 

“I do expect there'll be some of that if this trade war gets worse,” he said. “But it's not going to change our plans.” 

Sewing said the US policy uncertainty could prove beneficial to Europe in the long run. “The United States is putting both Europe's established security framework and the idea of free trade into question. More than ever Europe is needed as an engine for free trade,” he said.

"The demand for a European alternative to US banks is growing,” Sewing said, calling 2025 “a year of reckoning” for the bank.

Four more years

Dimon said he expects to retire within four years. A year ago, he said the timetable for his retirement was less than five years. For years previously, he had said he would stay in the CEO role “five more years.” Dimon, 69, has been CEO of JP Morgan for 19 years. 

“Obviously it's up to the board,” he said. “If I'm here for four more years or two or three, that's a long time." 

Dimon said the most important thing is that once he does step down, the strong teams he has in place across the sprawling bank will continue building on his success, regardless of who the new CEO is.

Source: IFR