US banks pandemic boom is at an end

JP MORGAN and Morgan Stanley posted a disappointing drop in their profits, in a sign that the pandemic-era deal- making boom was coming to an end.

The Wall Street banks unveiled worse- thanexpected results for the second quarter of the year, as firms pulled back from raising capital and put mergers and acquisitions on hold.

Major investment banks have raked in record fees since the pandemic began, acting for corporate clients who were desperate to buy rivals on the cheap or raise cash from investors to see them through lockdowns.

But as the cost of living crisis has deepened, putting pressure on firms’ profit margins and expansion plans, the work for investment bankers has begun to tail off.

JP Morgan said it had ‘temporarily suspended’ its share buybacks, used as a way to return money to shareholders, so it could quickly meet regulatory requirements demanding that it build greater capital buffers to cover its losses if the economy nosedived. The bank posted a profit of £7.3bn, missing expectations.

Boss Jamie Dimon said the US economy was continuing to grow, and that consumer spending was looking relatively healthy. But he added that factors such as ‘geopolitical tension’ and high inflation would have ‘negative consequences on the global economy... down the road’.

Morgan Stanley’s profits hit £2bn, falling short of the £2.3bn analysts expected.

Chief executive James Gorman said: ‘Overall, the firm delivered a solid quarter.’

But the lender expects to pay out a £170m fine to regulators after it was found that bankers were using unofficial channels such as Whatsapp to communicate about company business.