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The bankers who drove Wall Street’s profit during the darkest days of Covid-19 now find themselves in a tough spot. JPMorgan and Morgan Stanley both reported big drops in their dealmaking revenue for the second quarter of the year, and rivals are likely to show the same. Fees halved, year-on-year, and the trading boost that offset them isn’t reliable. Banks aren’t yet talking about lay-offs, but such painful trade-offs look inevitable.

Until the Federal Reserve started jamming the brakes on the U.S. economy, dealmakers lived high on the hog. Morgan Stanley’s advisers and underwriters brought in $10.3 billion in 2021, compared with $5.7 billion in 2019. Annualizing this quarter’s fees would give a paltry $4.3 billion. It’s a similar story at JPMorgan, where the run rate of $6.6 billion in annual investment banking revenue pales next to 2019’s $7.6 billion.

So far, the slump has been more than offset by lively markets. Revenue from flipping stocks and bonds rose 15% at JPMorgan in the second quarter, year-on-year, and over 20% at Morgan Stanley, towering over shrunken deal fees. Trading and investment banking sit in the same divisions at both firms. But revenue derived from shifting securities is likely to go back roughly to where it was, especially as volatility in the bond market subsides.

Even if things just return to normal, investors have tougher expectations of how profitable banks ought to be. Costs ate up just 49% of JPMorgan’s investment bank revenue last year, way less than the 56% it reported in 2019. Chief Executive Jamie Dimon has said he expects margins to rise from pre-Covid levels, as has Morgan Stanley boss James Gorman. And it’s getting more expensive to run an investment bank. Morgan Stanley expects to pay a $200 million fine because its bankers were using unapproved personal devices. Policing good behavior costs money. JPMorgan’s investment-bank headcount is now nearly 70,000, whereas at the end of 2019 it was just over 60,000.

Banks may be kind even if things don’t improve. With other parts of the business doing well, there’s still enough to go around. JPMorgan raised its estimate of how much it will make in interest on its lending activities on Thursday. Morgan Stanley has a wealthy business that’s still generating a healthy profit. But it’s unlikely those divisions will want to subsidize dealmaking colleagues for long, despite the rainmakers’ efforts in happier times.

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