A Wall Street revival provided a second-quarter boost to big banks at a time of rising challenges for their Main Street consumer operations.

Investment banking fees jumped at JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) from a year ago as dealmaking showed more signs of life following a two-year-long slump. Trading revenue was also up for all three institutions.

"We are happy to see the progress," JPMorgan CFO Jeremy Barnum told analysts.

Stocks of all three banks fell, however, as higher interest states and elevated deposit costs ate away at more traditional consumer banking margins. The banks also set aside more money for future loan losses when compared with a year ago, a sign that they expect credit conditions to worsen.

What attracted the most attention from investors Friday was that a key measure of lending profit known as net interest income fell at JPMorgan, Wells Fargo and Citigroup from the previous quarter as customers continue to migrate to higher-yielding deposit products like CDs.

Net interest income accounts for the difference between what banks earn from their loans and pay out on their deposits.

This measure at JPMorgan declined 1% from the prior quarter. If not for a $8 billion one-time accounting gain tied to an exchange of shares in credit card giant Visa (V), JPMorgan’s overall net profit would have declined 9% from a year ago.

Its stock was roughly flat in midday trading.

The decline in lending income at Wells Fargo was deeper than analysts anticipated, helping to push its stock down more than 7%.

Several analysts hoped Wells Fargo might offer a higher revision to its net interest income guidance for the full year. Instead, the bank seemed more comfortable in a lower range, predicting it would fall between 8% and 9%.

But even Wells Fargo benefited from more Wall Street activity. Its investment banking revenues surged 38% to $430 million.

At JPMorgan, investment banking rose 50% from last year, to $2.35 billion. At Citigroup, those fees jumped 60% in the second quarter to $853 million.

'Green shoots'

Wall Street has been waiting two years for this moment, enduring repeated false starts.

Last year was supposed to be the year things turned around as executives touted a string of IPOs and merger announcements. Instead, 2023 was the worst year for dealmaking in a decade, as clients turned cautious about everything from the direction of interest rates to relations with China to the larger US economy.

Some executives even had to walk back their talk of "green shoots" after the hoped-for surge in deals failed to materialize.

So far this year, things are looking up despite lingering concerns about the inflation, geopolitical tensions and an uncertain presidential election outcome.

The second-quarter Wall Street results from JPMorgan and Citigroup were also a good sign for other Wall Street heavyweights such as Goldman Sachs (GS), Morgan Stanley (MS) and Bank of America (BAC) that are due to report earnings next week.

Despite the improvement, Barnum of JPMorgan was careful Friday not to get too excited about the investment banking performance as he cited potential headwinds. One potential problem is an intense focus from federal regulators on antitrust concerns, which some market observers say is depressing deal activity.

"The dialogue on M&A is robust, I would say, a little bit more elevated,” Barnum said. But “there's a little bit of a chilling effect on M&A because of the regulatory environment, and that remains the case.”

JPMorgan CEO Jamie Dimon also offered some general caution in a press release, saying that "while market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks."

He referenced geopolitical tensions and persistent inflationary forces, adding that "inflation and interest rates may stay higher than the market expects."

Dimon did not attend JPMorgan’s second-quarter earnings conference calls with reporters or analysts Friday.

The reason given by bank executives: a travel conflict.

The bank’s spokesman told reporters Dimon was flying back from Germany after helping to celebrate the bank’s 100th anniversary in that country.

The bank CFO, Barnum, told reporters "it's a travel conflict, that's it. There's literally nothing more to it.”

Barnum said Dimon almost always attends the calls and “that should continue to be the expectation.”

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