JPMorgan profit beats analysts expectation; raises interest income forecast

JPMorgan Chase raised its net interest income forecast for 2025 after strong performance in its investment banking and trading divisions helped it surpass profit expectations for the second quarter.

 

The bank now expects about $95.5 billion of NII, or the difference between what it earns on loans and pays out on deposits, compared with an earlier estimate of nearly $94.5 billion. 

"The U.S. economy remained resilient," CEO Jamie Dimon said in a statement. "The finalization of tax reform and potential deregulation are positive for the economic outlook. However, significant risks persist - including from tariffs and trade uncertainty, worsening geopolitical conditions, high fiscal deficits and elevated asset prices." 

 

Market activity surged as investors seized opportunities and hedged risks in response to shifting U.S. tariff policies. The turmoil propelled JPMorgan's trading revenue 15 per cent higher to $8.9 billion, driven by gains in both fixed income and equities. 

Investment banking fees also rose 7 per cent to $2.5 billion, underpinned by a rise in mergers and acquisitions and debt underwriting.

Both trading and investment banking performed better than management's earlier guidance. In May, the bank had projected a mid-teens percentage drop in investment banking fees, while trading revenue was expected to grow by a mid-to-high single-digit percentage. 

Headcount fell by more than 1,300 employees to 317,160, but JPMorgan's workforce remains the largest among its peers after a rapid expansion in recent quarters. The bank expects it to be flat in 2025. 

Excluding one-off costs, JPMorgan earned $4.96 per share, compared with the $4.48 per share that analysts were expecting, according to estimates compiled by LSEG. 

 

Provision for credit losses was $2.85 billion, compared with $3.05 billion a year earlier. 

Shares were marginally down before the open. 

POLICY CLOUDS OUTLOOK 

Investors are closely scrutinizing banks' results and their executives' commentary this quarter to assess the impact of tariffs and the tax and spending bill signed into law by President Donald Trump earlier this month. 

The bill is estimated to add more than $3 trillion to U.S. debt over the next decade, sparking backlash from some Republicans and Trump allies like Elon Musk who have raised concerns about fiscal irresponsibility. 

However, while uncertainty has clouded the outlook, there were bright spots for lenders during the second quarter. 

JPMorgan was among 22 large banks that aced the Federal Reserve's stress tests, enabling it to boost its quarterly dividend and announce $50 billion in stock buybacks. 

The Fed also advanced a proposal to overhaul the "enhanced supplementary leverage ratio," which could lower the capital large global banks such as JPMorgan must hold against relatively low-risk assets. 

The bank's overall profit fell 17 per cent in the second quarter, but the comparison was skewed because of a nearly $8 billion one-off gain it had recorded on a share exchange agreement with Visa last year.  Wells Fargo results 

Wells Fargo beat second-quarter profit estimates on Tuesday but cut its 2025 guidance for net interest income, dropping shares of the lender by more than 5 per cent.

 

The bank expects its interest income to be roughly in line with the 2024 level of $47.7 billion. In April, it said NII growth would be at the low end of the 1 per cent to 3 per cent range. 

Wells Fargo said lower interest income in its markets business led to the NII forecast cut. Analysts and investors had been skeptical about its ability to meet its interest income targets after a slow start to 2025, as elevated interest rates weighed on demand from borrowers. 

Last month, the U.S. Federal Reserve lifted Wells Fargo's seven-year $1.95-trillion asset cap, allowing the bank to pursue unimpeded growth. The bank exceeded that value of assets in the reported quarter. 

"We now have the flexibility to proactively grow deposits and to allocate capital to grow loans and our corporate investment bank," CEO Charlie Scharf told analysts. 

"We expect to be more aggressive in our pursuit of consumer and corporate deposits, and we will selectively look to grow loans, though we will be cautious during periods of economic uncertainty." 

The bank had expected its NII, or the difference between what it earns on loans and pays on deposits, to be relatively stable in the first half of 2025, with more growth in the second half. 

Wells Fargo CFO Michael Santomassimo told a media briefing the lower NII outlook was driven by allocating more capital to markets businesses with low or no interest income. 

Proposed tariff increases by President Donald Trump's administration on U.S. trading partners have caused some clients to be cautious about borrowing, Santomassimo said, but added there has been little impact on credit quality, or borrowers' ability to repay debt. 

Wells Fargo's provision for credit losses fell to $1.01 billion in the quarter from $1.24 billion a year ago, helping profit grow in the second quarter. 

The fourth-largest U.S. lender's net income was $5.49 billion, or $1.60 a share, in the three months ended June 30.

That compares with $4.91 billion, or $1.33 a share, a year earlier. 

Excluding one-time costs, the lender earned $1.54 per share compared with expectations of $1.41, according to estimates compiled by LSEG. 

Investment banking fees rose 9 per cent to $696 million in the quarter, driven by higher advisory fees.

Shares of Wells Fargo are up 12.5 per cent this year. 

David Wagner, portfolio manager at Aptus Capital Advisors, said Wells Fargo shares had reached a high valuation after they rallied this year. 

"While we remain bullish on Wells Fargo’s growth prospects and continued profitability improvement, we believe upside to its EPS (earnings per share) estimates is now appropriately reflected in its premium valuation, limiting near-term upside to WFC shares." 

DEFENSE TO OFFENSE 

Wells Fargo has been focused on fixing its regulatory problems in recent years. While it labored under a $1.95-trillion cap asset cap, rivals expanded. 

With the asset cap lifted and regulatory issues largely in the rearview mirror, Wall Street analysts expect Wells Fargo to attract more investor interest as its profits grow. 

"We now have the opportunity to grow in ways we could not while the asset cap was in place and are able to move forward more aggressively," Scharf said. 

Santomassimo said the firm will allocate more capital to its markets business, while continuing to grow in areas of investment banking, especially the middle market segment, and wealth business. 

"Of capabilities that we have there, investment banking across both the large corporate space and the middle market and commercial bank space should be an area of growth as well," he said. 

Santomassimo said investment banking activity picked up late in the second quarter and in the third quarter. 

"It certainly seems like volumes are picking up," he said. 

Wells Fargo is likely to beef up its wholesale businesses by adding market share in commercial banking, corporate and investment banking and trading, Scharf said previously. 

He has said the bank will expand carefully. It has closed this year seven regulatory punishments, known as consent orders, and 13 since 2019. It still has one remaining consent order from 2018. 

"The asset cap removal is expected to take some time for benefits to ramp up and be effective at more aggressively growing NII," said Argus Research director of financial services research Stephen Biggar. 

Wells Fargo had 212,804 employees as of June 30, compared with 215,367 at the end of March. Its headcount has fallen every quarter since late 2020.