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JPMorgan Chase saw its quarterly trading revenue rise by more than a billion dollars to $5.6-billion (U.S.).ERIC THAYER/Reuters

Robust trading results from the major U.S. investment banks in the second quarter bode well for the capital markets arms of the big six Canadian banks, which are due to report earnings next month.

On Monday, Bank of America posted results that were better than estimates, partly because of a strong showing in its fixed-income business in the three-month period that ended on June 30. It was a similar story last week for JPMorgan Chase & Co., which saw its quarterly trading revenue rise by more than a billion dollars to $5.6-billion (U.S.).

"The U.S. capital markets results, particularly on the trading side, and specifically the fixed-income trading business – those results came in better than expected," Meny Grauman, analyst with Cormark Securities Inc., said in an interview.

Four of the six big U.S. banks have reported their financials since last last week. Goldman Sachs Group Inc. and Morgan Stanley are still to come.

There had been trepidation that Britain's shocking vote on June 23 to leave the European Union would hit the trading businesses of the U.S. investment banks hard. So far, indications are that "Brexit" has had a fairly muted impact.

"The large U.S. investment banks, at least in their commentaries, are talking about pretty good client activity and trading results, stretching into their third quarter," Mr. Grauman said.

By the time Canadian banks start reporting their equivalent quarter, investors will have an even better idea of the effect of Brexit. Unlike U.S. banks, which follow a calendar year, the fiscal year for Canadian banks ends on Oct. 31. Their third-quarter results will show activity until the end of July.

The National Bank of Canada has the highest exposure to capital markets of any big Canadian bank, with about 40 per cent of its earnings coming from the unit in 2015, according to Mr. Grauman. The Royal Bank of Canada had in the region of 30 per cent exposure.

Another reason to expect a strong quarter from the capital markets arms of the Canadian banks is the revival in the commodities market. A rally in oil and a surge in the price of gold has helped drive a number of billion-dollar-plus bought deals in recent months, and driven business the way of the big bank-owned dealers in particular. In early June, Suncor Energy Inc. raised nearly $2.9-billion in a secondary financing co-led by TD Securities Inc., CIBC World Markets Inc. and J.P. Morgan Securities Canada Inc.

Despite expectations of a strong showing on the capital markets wings of the Canadian banks, don't expect the stocks to rally as a result.

"The market is not really focused on capital markets results any more," Mr. Grauman said.

The emphasis is elsewhere these days: the lingering effects of oil-and-gas exposure on loan books, net interest margins, loan growth and questions over the sustainability of the multidecade bull run in Canadian residential real estate.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:18pm EDT.

SymbolName% changeLast
BAC-N
Bank of America Corp
+0.19%37.88
CM-N
Canadian Imperial Bank of Commerce
+1.38%50.76
CM-T
Canadian Imperial Bank of Commerce
+1.34%68.81
GS-N
Goldman Sachs Group
+0.48%417.25
JPM-N
JP Morgan Chase & Company
+0.47%200.45
MS-N
Morgan Stanley
+0.91%94.35
NA-T
National Bank of Canada
-0.08%114.48
RY-N
Royal Bank of Canada
+0.7%101.1
RY-T
Royal Bank of Canada
+0.46%136.86
SU-N
Suncor Energy Inc
+1.1%36.88
SU-T
Suncor Energy Inc
+0.89%49.94

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