US banking giants to report higher profits even as dealmaking drags
By Nupur Anand, Niket Nishant and Saeed Azhar
NEW YORK (Reuters) — Wall Street banks are expected to report higher profits for the second quarter as rising interest payments offset a downturn in dealmaking.
For universal banks such as JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) that serve retail consumers as well as corporations, earnings per share (EPS) are expected to jump more than 40%, according to analyst estimates from Refinitiv I/B/E/S as of late Monday. Bank of America (NYSE:BAC)'s EPS will likely climb more than 7%. Citigroup (NYSE:C) is expected to lag its peers with a 43% drop in EPS.
Results for investment banking behemoths will also weaken, with EPS forecast to drop almost 59% at Goldman Sachs (NYSE:GS). Morgan Stanley (NYSE:MS)'s EPS is anticipated to drop 9%, although revenue from wealth management will likely cushion the blow from lackluster dealmaking.
Universal lenders have been buoyed by American consumers who continue to spend money and remain in good financial health, said David Konrad, an analyst at Keefe, Bruyette & Woods. That offsets the doldrums in investment banking, where revenues have been depressed by rising interest rates and economic uncertainty.
«Goldman will have a dismal quarter again for investment banking and trading has been lackluster due to lower volatility,» said Stephen Biggar, an analyst at Argus Research. The bank will probably take a writedown on its consumer business, he added.
Sluggish deal markets will continue to be a sore spot for Wall Street after global investment banking activity plunged to $15.7 billion in the second quarter, the lowest since 2012, according to Dealogic data.
Banking executives have also lowered expectations for the second quarter after mergers,
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