JPMorgan Chase on Friday posted second-quarter profits and revenue that topped analysts’ expectations as investment banking expenses rose 52% from a year earlier.
Here is the company report:
- earnings: $4.26 per share adjusted vs. $4.19 the estimate of analysts surveyed by LSEG
- result: $50.99 billion vs $49.87 billion estimate
The bank said earnings rose 25% from the prior period to $18.15 billion, or $6.12 per share. Excluding items related to the bank’s stake in Visa, the profit was $4.26 per share.
Revenue rose 20% to $50.99 billion, beating the consensus estimate of analysts surveyed by LSEG, helped by better-than-expected investment banking fees and equity trading results.
CEO Jamie Dimon noted in a release that the company is wary of potential future risks, including higher-than-expected inflation and interest rates, even though current stock and bond valuations “reflect a somewhat benign economic outlook.”
“The geopolitical situation remains complex and potentially the most dangerous since World War II – although the outcome and impact on the global economy remains uncertain,” Dimon said. “There has been some progress that has brought inflation down, but there are still some inflationary forces ahead of us: large fiscal deficits, infrastructure needs, trade restructuring and world remilitarization.”
A rebound in the activity of Wall Street, especially on the advisory side, is expected to help banks in this quarter, and the results of JPMorgan bear it.
JPMorgan earned $2.3 billion in investment banking fees, beating StreetAccount estimates by about $300 million.
Equity trading revenue rose 21% to $3 billion, beating estimates of $230 million, on strong derivatives results. Trading fixed income rose 5% to $4.8 billion, matching estimates.
But the bank had a $3.05 billion provision for loan losses in the quarter, beating estimates of $2.78 billion, suggesting it expects more borrowers to default in the future. A rise in charge-off and moves to build loan loss reserves in the quarter was driven by the firm’s massive credit card business, the bank said.
“JPMorgan has navigated a very challenging interest rate environment,” said Octavio Marenzi, CEO of consulting firm Opimas.
Still, while banking and equity trading are increasing yields, “We’re seeing Main Street banking start to sputter,” Marenzi said. “Provisions for credit losses have widened, suggesting that JPMorgan expects to see a rough patch in the US economy.”
JPMorgan shares were down 2% in morning trading.
Still, JPMorgan CFO Jeremy Barnum told reporters on Friday on a call that overall he sees “healthy consumers” despite weakness in the low-income segment. About half of the increase in card reserves was tied to rising balances, he said.
“The overall picture on cost-offs is consistent with a story of normalization rather than deterioration at this time,” Barnum said. “Yes, the economy is slowing down, but there seems to be a trend toward a soft landing.”
Wells Fargo and Citigroup also posted earnings there, when Goldman Sachs, Bank of America and Morgan Stanley report next week.
This story is evolving. Please check back for updates.
