J.P. Morgan sees room for 3Q investment-banking revenue upgrades as management guidance may be conservative

Overview

This sector update reads US-bank management commentary into J.P. Morgan's 3Q26 forecasts for global investment banks. The report expects resilient trading and banking revenues, sees potential for upside as September progresses, and prefers UBS and Deutsche Bank among European banks because their valuations remain well below US investment-bank peers.

Core views

J.P. Morgan maintains a positive view on global investment banks, arguing that recent 3Q commentary from Bank of America, Citi and JPMorgan Chase may embed conservatism ahead of earnings. Management guidance for markets revenue ranged from roughly flat year-on-year at Bank of America, to mid-single-digit growth at Citi, to mid-to-high-teens growth at JPMorgan Chase. J.P. Morgan forecasts 3Q26 markets revenue for its covered global investment banks to increase 10% year-on-year, with US banks up 18% on average and European banks up 2%. September is described as the decisive month for third-quarter investment-banking revenues, leaving two weeks of deal activity that could support upside surprises when results are reported. The main source of strength is expected to remain Equities. J.P. Morgan forecasts Equities revenue to grow 21% year-on-year in USD in 3Q26, even as it normalizes 27% sequentially from a record 2Q. For FY26, Equities Sales & Trading revenue is forecast to rise 29% year-on-year and reach a record level, with prime brokerage identified as the key driver and the strongest-performing business across FICC and Equities. Citi reported continued momentum in equities, including prime brokerage and derivatives, while Bank of America indicated that equities trading was up year-on-year in 3Q to date. The report nevertheless builds in a softer second half: it assumes Equities revenue falls 24% in 2H26E versus 1H26, following exceptionally strong 1H26 growth of 41% year-on-year for the covered group. For FICC, J.P. Morgan forecasts flat 3Q26 revenue year-on-year and a 13% sequential decline, but remains constructive on the full-year outlook. FY26 FICC revenue is forecast to increase 7% year-on-year, supported by client activity that the report expects geopolitical uncertainty to keep elevated. Citi highlighted strength in spread products, including financing and securitization, and momentum in its FX franchise, whereas Bank of America described fixed-income revenue as down year-on-year and variable during the quarter. J.P. Morgan's second-half assumptions are more cautious, with FICC down 22% versus 1H26; together with the Equities assumption, this produces a forecast 23% half-on-half decline in markets revenue for covered global investment banks in 2H26E. Investment-banking-fee indicators appear weaker than the report's forecast. Dealogic data for 3Q to date show fees down 9% year-on-year, with ECM up 14%, DCM down 12%, and M&A down 15%. J.P. Morgan nevertheless forecasts covered banks' IB fees to rise 7% year-on-year in 3Q26 and 23% for FY26, emphasizing that advisory-fee data can be lumpy because revenue recognition depends on deal closures. Citi expected low-single-digit banking-revenue growth with possible upside from final-quarter deals; Bank of America guided to $1.6-1.8 billion in fees, implying a decline of more than 10%; and JPMorgan Chase expected mid-to-high-teens growth, absent a major market disruption. The report also identifies anticipated mega IPOs in 2026-27 and the associated financing and secondary-trading activity as a potentially important, though externally difficult to quantify, driver of the future revenue pool. Europe has no year-on-year FX headwind in 3Q26, but J.P. Morgan expects a less favorable mix than in the US because European firms have less exposure to the AI theme and less commodities exposure in FICC. UBS is viewed as best positioned from a markets-mix perspective because of its primarily equities-oriented franchise. For Deutsche Bank, the report notes that company consensus already assumes FIC revenue declines 3% year-on-year in 3Q. J.P. Morgan includes UBS at 10.7x 2028E P/E and Deutsche Bank at 7.6x 2028E P/E in its European Banks top-picks portfolio, versus an average 14.5x 2028E P/E for US investment banks, arguing that the valuation gap is too wide and should narrow over time.

Analysis framework

J.P. Morgan combines bank-management commentary, Dealogic transaction-fee data, Bloomberg market and trading indicators, company data, and its own segment forecasts. It separates revenue into FICC, Equities, and investment-banking fees, compares year-on-year, sequential, half-year, and full-year changes, and then assesses how business mix and valuation differ between US and European banks.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Segment-level revenue analysis across FICC, Equities, and investment-banking fees

  The report breaks total investment-bank revenue into operating segments and compares their year-on-year and sequential trajectories to identify the businesses driving or constraining sector results.

• Valuation methodsP/E and PEG Valuation

  Forward P/E comparison

  J.P. Morgan compares UBS and Deutsche Bank's 2028E P/E multiples with the average multiple for US investment banks to support its view that the European valuation discount is too wide.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• UBS (UBSG.S)

  European Banks top pick and a covered global investment bank positioned to benefit from an equities-oriented markets mix.

  Strengths

  J.P. Morgan views UBS as best positioned from a mix perspective because its markets business is mainly equities geared.

  Weaknesses

  European investment banks have less exposure to the AI theme and commodities-related FICC activity than US peers.

  Comparison

  Trades at 10.7x 2028E P/E versus an average 14.5x for US investment banks.

  Risks

  A seasonal second-half slowdown and weaker European revenue mix could constrain performance.

• Deutsche Bank (DBKGn.DE)

  European Banks top pick with consensus expectations that are already conservative for 3Q FIC revenue.

  Strengths

  Company consensus assumes FIC revenue declines 3% year-on-year in 3Q, which the report identifies as conservative.

  Weaknesses

  European banks have a less favorable AI and commodities-related revenue mix than US peers.

  Comparison

  Trades at 7.6x 2028E P/E versus 10.7x for UBS and a 14.5x average for US investment banks.

  Risks

  FICC revenue trends and the broader seasonal second-half slowdown remain relevant risks.

Key data

• Global IB markets revenue forecast+10% YoY in 3Q26US banks are forecast +18% on average and Europe +2%.
• Equities revenue forecast+21% YoY and -27% QoQ in 3Q26Expected to normalize from a record 2Q.
• FICC revenue forecast0% YoY and -13% QoQ in 3Q26FY26 revenue is forecast +7% year-on-year.
• FY26 Equities Sales & Trading+29% YoYJ.P. Morgan expects a record year, led by prime brokerage.
• 3Q investment-banking fee tracking-9% YoYDealogic data show ECM +14%, DCM -12%, and M&A -15% year-on-year.
• IB fee forecast+7% YoY in 3Q26; +23% YoY in FY26The forecast is stronger than current fee tracking because deal-close timing can materially affect bookings.
• European valuation comparisonUBS 10.7x P/E 2028E; Deutsche Bank 7.6x; US IB average 14.5xJ.P. Morgan expects the valuation gap to narrow over time.

Impact & implications

The report argues that strong Equities activity, resilient FICC demand, and potentially conservative management guidance leave scope for 3Q earnings upside, although the sector's expected second-half revenue decline reflects normal seasonality after an exceptionally strong first half. For Europe, UBS's equities mix and Deutsche Bank's conservative FIC consensus expectations are presented as relative advantages, alongside discounted valuations versus US peers.

Risks

• Second-half revenue is expected to be seasonally slower than the exceptionally strong first half, with markets revenue forecast down 23% half-on-half for covered global investment banks.
• Investment-banking fees are sensitive to deal-close timing, especially advisory fees, making quarterly outcomes lumpy.
• A major market disruption could prevent the stronger investment-banking-fee outcome indicated by JPMorgan Chase management.
• European investment banks have less exposure to AI-related activity and commodities FICC than US peers, creating a less favorable mix.

What to watch

• September deal activity and fee bookings, which the report identifies as decisive for 3Q investment-banking revenue.
• Reported 3Q Equities, FICC, and IB-fee revenue versus management guidance and J.P. Morgan's forecasts.
• The pace of mega IPOs expected in 2026-27 and their associated financing and secondary-trading activity.
• Whether the P/E valuation discount of UBS and Deutsche Bank to US investment banks narrows over time.