JPMorgan Chase reported second-quarter earnings Friday that topped analysts’ expectations, as the corporate benefited from higher rates of interest and better-than-expected bond trading.
Here’s what the corporate reported:
- Earnings: $4.37 per share adjusted vs. $4 per share Refinitiv estimate
- Revenue: $42.4 billion vs. $38.96 billion estimate
Net income surged 67% to $14.5 billion, or $4.75 per share. When excluding the impact of its First Republic acquisition in early May — a $2.7 billion “bargain purchase gain” from the government-brokered takeover, in addition to loan reserve builds and securities losses tied to the acquisition — earnings were $4.37 per share.
Revenue rose 34% to $42.4 billion as JPMorgan took advantage of upper rates and solid loan growth. Revenue gains were fueled by a 44% jump in net interest income to $21.9 billion, which topped the StreetAccount estimate by roughly $700 million. Average loans climbed 13%, while deposits fell 6%.
“The U.S. economy continues to be resilient,” CEO Jamie Dimon said within the earnings release. “Consumer balance sheets remain healthy, and consumers are spending, albeit a bit more slowly. Labor markets have softened somewhat, but job growth stays strong.”
Jamie Dimon, chief executive officer of JPMorgan Chase & Co., speaks in the course of the Bloomberg Global Business Forum in Latest York, on Wednesday, Sept. 25, 2019.
Tiffany Hagler-Geard | Bloomberg | Getty Images
Dimon added that there have been “salient risks within the immediate view” including dwindling consumer balances, the chance that rates of interest can be higher for longer than expected, and geopolitical tension including the Ukraine war.
JPMorgan increased its guidance for 2023 net interest income to $87 billion, which is $3 billion higher than its guidance from May and the bank’s third increase to its NII forecast this 12 months.
Shares of the bank climbed about 2%.
Signs of strength
JPMorgan’s retail banking division was its essential source of strength this quarter. Profit surged 71% within the business to $5.3 billion on a 37% jump in revenue.
The bank’s results also benefited from better-than-expected trading and investment banking activity. In May, the bank said revenue from the Wall Street activities was headed for a 15% decline from a 12 months earlier.
But fixed income trading revenue only dipped 3% to $4.6 billion, topping the StreetAccount estimate by nearly $500 million. Equity trading revenue of $2.5 billion edged out the $2.41 billion estimate. And investment banking revenue of $1.5 billion topped the $1.42 billion estimate.
“The outcomes were outstanding and really showed strength across the board,” said Octavio Marenzi, CEO of consultancy Opimas. “Consumer banking was particularly strong, but even investment banking, which has been an issue child over the past 12 months or so, is starting to point out signs of life.”
JPMorgan has been a standout recently on several fronts. Whether it’s about deposits, funding costs or net interest income — all hot-button topics for the reason that regional banking crisis began in March — the bank has outperformed smaller peers.
That is helped shares of the bank climb 11% to date this 12 months as of Thursday, compared with the 16% decline of the KBW Bank Index. When JPMorgan last reported ends in April, its shares had their biggest earnings day increase in twenty years.
First Republic impact
This time around, JPMorgan had the advantage of owning First Republic for a lot of the quarter.
The acquisition, which added roughly $203 billion in loans and securities and $92 billion in deposits, helped cushion JPMorgan against a few of the headwinds faced by the industry. Banks are losing low-cost deposits as customers find higher-yielding places to park their money, causing the industry’s funding costs to rise.
That is pressuring the industry’s profit margins. Last month, several regional banks disclosed lower-than-expected interest revenue, and analysts expect more banks to do the identical in coming weeks. On top of that, banks are expected to reveal a slowdown in loan growth and rising costs related to business real estate debt, all of which squeeze banks’ bottom lines.
Wells Fargo and Citigroup also reported earnings Friday. Bank of America and Morgan Stanley report Tuesday. Goldman Sachs discloses results Wednesday.
