JPMorgan Chase under pressure despite strong earnings report

JPMorgan Chase under pressure despite strong earnings report


JPMorgan Chase on Friday posted second-quarter financial results that came in ahead of analyst estimates as strong lending results offset declines in trading. However, its stock went down in post-earnings session due in part to its lower expectations for lending income. Adjusted EPS reached $1.71 versus $1.58. Revenue was at $26.41 billion versus $24.96 billion.

JPMorgan Chase has seen a weakening capital market business in the second quarter, thanks to its broad positioning. The gap was boosted by income from private and corporate banking as well as from consulting, for example, during exchanges and takeovers. The administration of wealth also fell off. In addition, there was a huge inflow of a settlement in a legal dispute.

“US consumers are doing well,” said bank chief Jamie Dimon. This is reflected in the retail business. Lending and savings, the bank also handles more transactions for retailers, and customers used their credit cards more frequently. On the other hand, revenues from the capital market business declined because the markets had calmed down and the customers acted less.

The political turmoil at the end of last year, like the Brexit decision and the election of Donald Trump to the US president, had stirred the capital markets in excitement. Investors were often relocating their deposits, which the banks earned through fees. These revenues now declined as expected.

Above all, the important business with bonds shrank – roughly in fifths. On the other hand, revenues from the smaller equities business remained largely stable. Taken together, revenues from the trading sector shrank by 14 percent to $ 4.8 billion, while total revenues – the bank’s revenues – rose by 5 percent to $ 26.4 billion.

Investors pay close attention to the business figures of JPMorgan: The New York money house rings the reporting season and is seen as the benchmark for the industry. Next week the Bank of America and the investment banks Goldman Sachs and Morgan Stanley will be reporting their numbers.

Instinet analyst Steven Chubak said that while “2Q results are encouraging, we expect shares to come under some pressure.”

James Mitchell, analyst at Buckingham Research, said the bank is guiding for a net interest income increase of $4 billion which is lower than the $4.5 billion. He called the lower outlook an “incremental negative.”

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I am a lecturer at the University of Economics in Bratislava, department of Banking and International Finance. I have a Ph.D. academic degree, my dissertation was focused on major markets. Commodities and stock markets are also the main focus of my research and publication activities. I have approximately 10 years of investing experiences. My investments mostly focus on small- to mid-cap companies of energy sector, financial and technology.