By Saeed Azhar and Manya Saini
NEW YORK, July 14 (Reuters) - Wall Street bank earnings powered ahead in the second quarter with a strong lift from fees for advising on mergers and acquisitions and surging trading revenue, but the lenders warned about risks to the economy and markets.
The SpaceX initial public offering has helped. Wall Street banks, including Goldman Sachs and Morgan Stanley, played big roles in the nearly $86 billion SpaceX IPO. Banks on the SpaceX IPO raked in around $500 million
in fees.
Investment banking has been a strong area of revenue growth, with mega equity offerings and multibillion-dollar transactions signaling the most bullish dealmaking environment in years. Trading continues to be strong with higher-than-usual volatility due to geopolitical conflict and uncertainty surrounding AI disruption.
"We've had really terrific global markets performance and investment banking performances," said Bank of America Chief Financial Officer Alastair Borthwick on the bank's media call. "Business continues to feel good."
Bank of America beat estimates for second-quarter profit, benefiting from record trading activity and a surge in dealmaking, one of five banks reporting on Tuesday.
JPMorgan Chase reported a similar theme. Big-ticket IPOs and dealmaking helped drive investment banking fees to their highest levels since 2021, while stock traders capitalized on volatile markets.
'BOOMING ENVIRONMENT'
“What’s going on in equities is a booming environment with a ton of activity, big IPOs, the AI theme, a very active environment,” said JPMorgan CFO Jeremy Barnum on the bank's media call.
Global investment banking revenue hit $61.4 billion in the first half of 2026, a 24% jump from a year earlier, according to Dealogic data. JPMorgan remained the global leader in investment banking revenue, while Goldman Sachs was the global leader in advising on M&A.
Chip designer Cerebras' $6.4 billion IPO and Google-parent Alphabet's $85 billion share sale were also among the top deals in the second quarter.
"We thought the 2Q earnings were going to be very good, but they turned out to be extraordinary," said Macrae Sykes, portfolio manager at GABF ETF, Gabelli Funds. "We continue to believe the environment for the major banks is very constructive due to business activity, market engagement and demand for capital with average loans up around 10%.”
Bank shares were mixed. JPMorgan rose 0.7%, Citi climbed 1%, BofA gained 1% and Goldman jumped 4%, but Wells Fargo dropped 1.7%.
Still, there were notes of caution about markets.
"How fragile/dangerous/overheated/exuberant is the current moment?" asked JPMorgan's Barnum, pointing to nominal leverage numbers and valuations being "quite high."
"It would be naive not to be worried – but it's easy to be worried and the market keeps going up," he said.
Citi CFO Gonzalo Luchetti said conflict in the Middle East may affect deal activity over time, although the pipeline remains strong.
JPMorgan CEO Jamie Dimon said in the bank's press release that "several risks are shifting below the surface like tectonic plates, including geopolitical tensions and wars, sticky inflation, large global fiscal deficits and elevated asset prices," adding "they could also cause meaningful disruptions when they shift or collide."
Goldman Sachs exceeded second-quarter profit expectations, Wells Fargo beat Wall Street estimates for second-quarter profit, and Citigroup reported a 45% jump in second-quarter profit and its highest quarterly revenue in a decade. Morgan Stanley will report second-quarter results on Wednesday.
"The AI-driven capex super cycle has benefited equity issuance, M&A activity and debt financing, while trading has been helped by Iran-related volatility across asset classes," said Stephen Biggar, director of financial services research at Argus Research.
(Saeed Azhar, Tatiana Bautzer and Nupur Anand in New York, Niket Nishant, Manya Saini, Utkarsh Shetti, Arasu Basil and Pritam Biswas in Bengaluru; Writing by Megan Davies; Editing by Rod Nickel)
