NEW YORK, July 14 (Reuters) - Wall Street banks' profits jumped in the second quarter, boosted by a strong rise in mergers and acquisitions advisory fees and increased revenue from trading activities, but some banks warned of risks that could face the economy and markets in the future.

Investment banking has been a strong area for revenue growth for banks, with large-cap companies going public and multibillion-dollar transactions indicating the most optimistic deal-making conditions in years.

Trading remains robust with higher-than-usual volatility due to geopolitical conflicts and uncertainty surrounding the disruptions caused by artificial intelligence. SpaceX's initial public offering provided a significant boost, with participating banks earning approximately $500 million in fees.

“We’ve done a really great job in global markets and investment banking,” said Alastair Borthwick, Bank of America’s chief financial officer, during a conference call. “Business continues to perform very well.”

Bank of America's second-quarter profits beat expectations, benefiting from record trading activity and a significant increase in deal-making. It was one of five banks that announced their results today.

JPMorgan Chase announced similar results, as massive initial public offerings and deals pushed investment banking fees to their highest level since 2021, while stock traders profited from market volatility. JPMorgan's profits were the highest ever recorded by a US bank in a single quarter, and its market capitalization now exceeds $920 billion, bringing it closer to the trillion-dollar club on Wall Street.

* "A thriving environment"

"What's happening in the stock market is a booming environment with tremendous activity, huge initial public offerings, the AI theme, and a very active environment," said JPMorgan's chief financial officer, Jeremy Barnum, during a telephone press conference organized by the bank.

Analysts and investors expressed surprise at the strength of the profits.

Goldman Sachs and Wells Fargo both exceeded Wall Street expectations for their second-quarter earnings, while Citigroup reported a 45% jump in second-quarter profit and its highest quarterly revenue in a decade. Morgan Stanley will announce its second-quarter results tomorrow, Wednesday.

“The biggest gains were in investment banking, capital markets, and trading,” said Neville Jaffrey, portfolio manager at Allspring Global Investments, citing Goldman Sachs and JPMorgan as the biggest beneficiaries. Jaffrey, who manages funds heavily focused on bank stocks, including stakes in JPMorgan and Citi, added, “Capital markets and investment banking were the main drivers of all banks’ performance.”

Dealogic data indicated that global investment banking revenues reached $61.4 billion in the first half of 2026, a 24 percent increase year-over-year. JPMorgan maintained its global leadership in investment banking revenues, while Goldman Sachs topped the list of leading global firms providing mergers and acquisitions advisory services.

The $6.4 billion initial public offering of Cerebras and the sale of a stake in Alphabet, Google's parent company, for $85 billion were among the most notable deals in the second quarter.

Warnings

However, there were cautionary remarks regarding the markets.

Barnum of JPMorgan questioned "how fragile and dangerous the current situation is," given what he described as increased investment volumes through leverage and "extremely high" company valuations.

He added, "It would be naive not to be concerned, but it's easy to be concerned while the market continues to rise."

Gonzalo Lucetti, Citi's chief financial officer, said the conflict in the Middle East could affect deal activity over time, although the number of deals in the pipeline remains strong.

Bank of America CEO Brian Moynihan pointed to these risks, saying that although the U.S. economy has proven more resilient than expected, "inflation and tighter monetary policy remain key risks."

Wells Fargo CEO Charlie Scharf warned of these risks.

"Strong conditions like these don't last forever, and we are seeing banks and non-bank institutions investing large amounts of capital in a wide range of risky assets," said Sharf.