JPMorgan Chase’s investment banking income is expected to fall 45% to 50% year on year in the third quarter, according to president and chief operating officer Daniel Pinto, who spoke at a conference on Tuesday.
According to him, JPMorgan may alter its cost structure not only by slashing positions, but also by reducing the size of employee compensation.
However, trading has brought a welcome boost this year. JPMorgan forecast a 5% gain in market revenue over the previous year, as strong activity in fixed income offset reduced equities trading revenue.
The deal-making sluggishness that has plagued Wall Street this year shows no signs of abating.
JPMorgan Chase’s investment banking income is expected to fall 45% to 50% year on year in the third quarter, according to president and chief operating officer Daniel Pinto on a conference call on Tuesday.
Last year, the bank earned $3.3 billion in third-quarter investment banking revenue, during a bull market for IPOs, stock issuance, and other transactions.
Now, Wall Street is dealing with dramatic drops in capital market activity as IPOs grind to a halt and mergers decline following the worst first half in stock market history. This year, a bull market for bankers has turned into a bust, and corporations are anticipated to cut pay and jobs in the coming months.
Goldman Sachs was the first major Wall Street firm to admit yesterday that it was reducing staff by hundreds of positions this month.
When asked if JPMorgan would follow suit with layoffs, Pinto said that the firm would “over time” modify its staff base to reflect the prospects in global investment banking.
2020 vision
That is, in his opinion, about what the industry will earn in 2020.
According to Pinto, the overall pool of investment banking fees increased from around $79 billion in 2019, before the epidemic, to $95 billion in 2020, and $123 billion last year. The fee pool is forecast to fall to $69 billion in 2022, but Pinto expects it will eventually recover to levels seen in 2020.
According to him, JPMorgan may alter its cost structure not only by slashing positions, but also by reducing the size of employee compensation.
A large component of variable remuneration exists in the banking industry,” Pinto explained. “You may modify not only by letting individuals go, but also by cutting costs.”
Nonetheless, managers “need to be extremely careful when there is a bit of a slump” not to cut too deeply because doing so may affect the organisation when volumes resume, he warned.
However, trading has brought a welcome boost this year.
JPMorgan forecast a 5% gain in market revenue over the previous year, as strong activity in fixed income offset reduced equities trading revenue. The division generated $6.27 billion in revenue a year ago.
