UPDATE 5-JPMorgan profit beats on Wall Street rebound; raises interest income forecast

JPMorgan Chase raised its net interest income forecast for 2025 after a 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% higher to $8.9 billion, driven by gains in both fixed income and equities. Investment banking fees also rose 7% to $2.5 billion, underpinned by a rise in mergers and acquisitions and debt underwriting. The pipeline for initial public offerings was also picking up, CFO Jeremy Barnum told reporters on a call, though concerns remain. 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.

A well-capitalized balance sheet helped JPMorgan grow revenue in multiple segments, said Brian Mulberry, senior client portfolio manager at Zacks Investment Management, adding that the NII forecast lift was an "impressive flex." Headcount fell by more than 1,300 employees to 317,160, but the bank's workforce remains the largest among its peers after a rapid expansion in recent quarters. JPMorgan has said it expects it to be flat in 2025. Excluding one-off costs, the lender 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 down 0.6% 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% 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.

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