NEW YORK — A turbulent market during the third quarter may sink JPMorgan Chase & Co.'s investment banking fees by a third and take a chunk out of its trading revenue, said Jes Staley, the head of the business.
The bank will book about $1 billion in investment banking fees in its third quarter, compared to $1.5 billion a year earlier, Staley said at the Barclays Capital financial conference in New York.
Meanwhile, market revenues, funds brought in from trading activities, would be down by about 30% compared to the prior quarter, he said. The bank had $5.5 billion in fixed-income and equity markets revenue in the second quarter.
Staley heads JPMorgan's most profitable unit and one that has bested peers in recent quarters, boosting revenues and income even amid turmoil. He said the market volatility was seen in slowed equity offerings and a general pause in mergers and acquisitions during the quarter, which finishes at the end of the month.
Analysts said the guidance on the third quarter showed the market's wild ride had dragged down results more than expected.
Stifel Nicolaus analysts, who earlier in the day had upgraded JPMorgan stock to a buy rating, said the forecasts could reduce their earnings estimates by as much as 24 cents a share, though it could be offset by lower expenses. Stifel currently forecasts earnings of $1.18, equal to the Street average.
The bank is also expecting lower asset management revenue in the third quarter, a "modest" loss in its private equity and increased expenses in its corporate operations leading to a small loss there.
The entire corporation had $27.4 billion in second-quarter revenue and $5.43 billion in profits.
Meanwhile, Staley continued the JPMorgan stance that global requirements the world's biggest banks hold extra capital are unfair. Staley's boss, Chief Executive Jamie Dimon, recently said the rules are "anti-American." Staley said Dimon was "eloquently" defending the bank.
The rules include no benefits for being diversified, which unfairly punishes banks like JPMorgan, Staley added.
"Because we are allowing the rhetoric of big is bad to pervade the dialogue we are not giving any value to diversify the business model," Staley said. "That was one of the critical components that allowed this institution to make money every quarter during the crisis."
Staley also said the European Union has the size and economic ability to deal with its sovereign debt challenges, but faces difficult political choices.
He reiterated JPMorgan is comfortable with its own exposures to Europe, but also said a default by Greece would spread contagion fears to other major sovereigns. He said the world would require "significant" and "bold" decisions along the lines of the actions during the financial crisis to stop the spread.
