Fears the deal boom is coming to an end as US banks report falling profits

JP Morgan and Morgan Stanley posted disappointing earnings drops in a sign that the pandemic-era dealmaking boom is coming to an end.

Wall Street banks posted worse-than-expected second-quarter results as firms pulled back from raising capital and put mergers and acquisitions on hold.

Big investment banks have made record fees since the start of the pandemic, acting on behalf of corporate clients desperate to buy rivals on the cheap or get money from investors to see them through the correction.

But as the cost-of-living crisis deepened, putting pressure on firms’ profitability and expansion plans, work for investment bankers began to dwindle.

JP Morgan said it had “temporarily suspended” share buybacks, which are used as a way to return money to shareholders, so it can quickly meet regulatory requirements that require it to build a larger capital buffer to cover its losses in the event of a downturn in the economy.

The bank posted profits of £7.3bn, missing expectations.

Boss Jamie Dimon said the US economy continues to grow and that consumer spending looks relatively healthy.

But he added that factors such as “geopolitical tensions” and high inflation would have “negative consequences for the global economy… going forward.”

Morgan Stanley’s profit came in at £2bn, missing analysts’ expectations of £2.3bn.

Chief executive James Gorman said: “Overall the firm had a solid quarter.”

But the lender expects to pay a £170m fine to regulators after it emerged that bankers used unofficial channels such as Whatsapp to report the company’s business.