Every equity analyst quickly learns the market proverb that “if a stock doesn’t go up on good news, you need to find out why”.  So, plenty of Wall Street’s finest will be scratching their heads about JPMorgan’s results yesterday.  The numbers were really, really good, with a beat of expectations and upgrade of guidance.  But the stock opened slightly lower, traded broadly flat through the conference call, and never really looked like it was going to go higher than the previous day’s close.

Maybe there will be a delayed reaction, and JPM will be off to the moon again.  But in the meantime, it’s worth asking – if everything’s so awesome, why’s nobody happy?

It seems that things might be too good. Speaking on yesterday’s investor call, JPMorgan CFO Jeremy Barnum said, “I think if you look at the current market environment, it's hard to imagine a set of conditions that would be any better for us, right? Rates are at a good level for us. Deal activity is high. Capital markets are very strong … Normally, you would have some pockets doing a little better, some pockets doing a little worse. And that's part of what makes you think that some aspects of this are maybe not sustainable.”

It doesn’t help the JPMorgan share price that investors are suspicious of earnings beats when they’re driven by revenue gains in investment banking that happen late in the quarter. Predicting the timing of when a deal will close is always difficult, and although it can make a big difference to reported revenues if a number of transactions conveniently happen a few days before the quarter-end rather than a few days after, it’s not very economically meaningful. 

Barnum said JPMorgan had a really good last couple of weeks of June. However, Jamie Dimon recognised on the call that “you’ve seen how rapidly pipelines can grow and shrink […] it may stay wide open for a year and a half, something may happen geopolitically, then all of sudden that pipeline slows a little bit”.  For the time being, the JPMorgan executives think that some “tail risks are off the table”, making clients more willing to transact, but sponsors are “still reluctant to use the public markets”. 

It’s reasonable to see, then, why the market doesn’t want to extrapolate the Q2 numbers in investment banking. Rates may not remain low and markets’ strength may ebb.  

Of course, Barnum immediately went on to suggest that JPMorgan’s strength might be its own doing and the result of its “investments”, such that the bank will thrive irrespective of broader conditions.  But it’s easy to see why, even amidst these best-of-times, JPMorgan is only holding headcount steady and jobs aren't easy to come by. Both the bank and its stock are following the adage that it’s “better to travel hopefully than to arrive”.

Elsewhere, some of the naughtiest people in London might have been excited to hear that Chancellor Rachel Reeves’ latest speech has promised to “streamline” the Senior Managers’ Certification Regime and make it “less onerous”.  Does this mean that the new policy on “non-financial misconduct” (the one that wags are calling “Crispin’s Law”) is going to be abandoned?

Unlikely.  In fact, the changes appear to be pretty small and procedural.  The regulators are going to have a think about whether anything is really served by having senior bankers certify every year that they still think they’re fit and proper people.  There will be a bit more flexibility allowed in updating the official register when a new senior manager is promoted.  About the only change that’s remotely interesting to the City’s crooks and rogues is that the frequency with which criminal record checks need to be updated might be lowered.

All of this is apparently being done in order to “boost” the UK’s economic growth, which suggests that somebody might have an exaggerated view of the importance of HR paperwork, most of which needs to be done anyway.  But as a sign that the supervisors are being encouraged to get less nitpicky on small technical issues where there is no evidence of bad intent or harm done – like using WhatsApp – it’s worth celebrating anyway.

Another headwind for believers in the health of the investment banking industry is that companies whose business is downstream of the banks, like recruitment specialist Robert Walters, seem to have had a terrible Q2. (The Banker)

Some bankers will have spent last night at a downtown hotel, as there seems to be little chance of getting back to New Jersey by public transport in the floods. (WSJ)

SocGen continues to rebuild its franchise in equities, hiring Anvita Arora from BoA to be global co-head of ECM.  Luis Vaz Pinto will be transitioning to a client facing chairman role. (Bloomberg)

Hedge fund Qube is opening a Houston office, focused on commodities. (Bloomberg) 

“I was clearing out her crappy trees”.  If you live in Nantucket and want a sea view, one approach is to just go out and make one. It might not have been strictly legal, though. (Realtor.com)

The London and New York offices of French banks may be deprived of one of their longest-standing jokes, as Prime Minister François Bayrou suggests that France may need to reduce the number of public holidays in order to tackle its deficit. (FT)

One of the most fun jobs in financial services must be “Head of Superlatives” on the marketing team for premium credit cards.  Citi has decided to take the fight to “Amex Platinum” and “JP Morgan Sapphire Reserve”, by launching a product called “Strata Elite”. (Bloomberg)

There are “witches” selling magic spells on Etsy.  As well as a potential side-hustle for bored bankers, it might be possible to buy a spell to improve global financial sponsors deal activity. (WSJ)

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