Weak investment-banking numbers, and gloomy mortgage outlooks weigh on banks' second-quarter earnings

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1. JPMorgan and Morgan Stanley kick-off second-quarter bank earnings on Thursday. Weak mortgage lending numbers and the dearth of capital-markets activity will be scrutinized as rising rates and market volatility tame the appetite to transact.

Investment banks boosted their earnings in recent years thanks to record-breaking activity in capital markets and M&A, both of which thrived in a low interest-rate environment.

But the script has flipped. The Federal Reserve is raising rates in part to tamp down consumer spending. Investment-banking numbers have taken a hit as rate hikes have made it challenging to get deals done.

Corporate earnings, meanwhile, are expected to weaken. Startups' comfy bubble has also burst and loan defaults should rise next year, meaning that companies are reluctant to take on debt, according to data from Fitch Ratings. Global syndicated loan volumes totaled $2.14 trillion for the first half of 2022, a 21% dip on the same period last year, according to Refinitiv data.

Whispers of layoffs have risen above water-cooler talk. Institutions like JPMorgan and Wells Fargo have shed plenty from their mortgage teams, while the slump in IPOs and SPACs have equity-capital-markets bankers brushing up their resumes.

Renaissance Capital's IPO index is down 43% year-to-date, and Axios reported that equity-capital-markets bankers — who are responsible for arranging IPOs — might have to wait until next year to launch new deals.

One banker told Insider that he expects to see cuts in capital markets after the Labor Day Holiday.

Despite the slump in dealmaking, bankers who focus on advisory services are confident that deals will get done should conditions normalize. And then there's restructuring folks who stand to benefit when companies under duress need to clean up their capital structures and balance sheets.

Citi and Wells Fargo report on Friday, while Bank of America and Goldman Sachs round out the quarterly earnings on Monday, July 18.

In other news:

2. John Sandberg, a Douglas Elliman real-estate agent, purchased a Miami penthouse with funds he pulled from the stock market. Here's why he thinks Citadel's relocation from Chicago will boost Miami's real-estate market.

3. As dealmaking cools off, banks face billions in "hung debt," according to Bloomberg. Bank of America, Credit Suisse, and Goldman Sachs could each face a $100 million hit on one financing deal.

4. Morgan Stanley has named new global co-heads of investment banking, Reuters reported. The bank's current heads of investment banking, Mark Eichorn and Susie Huang, have been elevated to executive chairs of the division, Bloomberg first reported.

5. Bill Ackman is returning the $4 billion he raised for his record-breaking SPAC to investors. In a letter to Pershing Square Tontine Holdings shareholders, Ackman said the rapid economic recovery from the COVID pandemic disrupted attempts to find a suitable target company to take public through a merger.

6. A Facebook Marketplace scam uses fake Zelle emails to trick users into sending money. One seller who fell for it said he was out $300 and warned others to look closely at details. When customers say their money was stolen on Zelle, banks often refuse to pay, according to this report from the New York Times.

7. SoftBank-backed Remote is cutting 10% of its staff. The onboarding startup was valued at almost $3 billion during its last funding round. It cited economic uncertainty and a focus on more sustainable growth as reasons for laying off nearly 100 workers.

8. The founders of Three Arrows Capital are not cooperating with liquidators. The bankrupt crypto hedge fund defaulted on a $670 million loan and its founders' whereabouts are unknown.

9. Claira, a startup using AI to parse through financial contracts, just scored funding from Citi's strategic investment arm. Here's the 14-page pitch deck that sold the US lender on Claira.

10. Accountants and consultants working at the "Big Four" firms rake in six-figure salaries and can pocket healthy bonuses too. Here's how much folks from Deloitte, PwC, KPMG, and EY make.

Done deals:

• Partners Group acquired a majority stake in Energy-as-a-Service provider Budderfly. The private-equity firm also committed more than $500 million in growth capital as part of its investment.
• Canada Pension Plan and Investment Board has invested $334 million in Latin American discount food retailer D1. The Canadian firm will own a 19.3% stake in D1.

Curated by Aaron Weinman in New York. Tips? Email aweinman@insider.com or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.