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JPMorgan Chase, America's largest bank reported better than expected first quarter earnings Wednesday before the open. Revenue of $33.12 billion exceeded expected $30.52 billion driven by the $JPM’s trading $1.8 billion more revenue than analysts had expected. Goldman Sachs,  and Wells Fargo also report Wednesday.

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 JPMorgan Chase & Co NYSE: JPM · Reported Earnings Before Open Wednesday

 $4.50 Beat $3.10 EPS Forecast AND $33.12 $30.5 Billion Forecast in Revenue

Earnings (Updated)

JPM posted first-quarter profit of $4.50 a share including a $1.28 per share benefit from the reserve release, higher than the $3.10 per share expected by analysts surveyed by Refinitiv. a $5.2 billion benefit from releasing money it had previously set aside for loan losses that didn’t develop. Revenue of $33.12 billion exceeded the $30.52 billion estimate, driven by the firm’s trading operations, which produced about $1.8 billion more revenue than analysts had expected.

JP Morgan posted first-quarter profit of $14.3 billion, or $4.50 a share including a $1.28 per share benefit from the reserve release, higher than the $3.10 per share expected by analysts surveyed by Refinitiv. Excluding the impact of a $550 million charitable contribution, which lowered earnings by 9 cents, the bank earned an adjusted figure of $4.59, exceeding the $3.10 estimate.

Earnings Expectations are for EPS of $3.10, on revenue of $30.50 billion.

JPMorgan Chase $JPM, America's largest bank  kick off the banking sector's Q1 20 earnings season on Wednesday before the market opens with expectations for strong earnings. Last quarter JP Morgan blew away consensus expectations on both profits and revenues. Revenue for the period came in at $30.1bn,over the $28.7bn estimate. Investment banking revenue rose 37%.

JPMorgan Chase & Co. (JPM)  is expected to report adjusted net income of $9.3 billion, or $3.07 a share, on sales of $30.5 billion before the market opens on Wednesday, based on a FactSet survey of 21 analysts. In the same period a year ago the company posted earnings of 78 cents a share on sales of $29.1 billion. It reported a net income of $8.5 billion.

Last quarter trading revenue increased by 20%, while net interest income slipped by 7%, due to the flattish yield curve. This will be improved given the sell-off in the long end of the curve pushing yields higher. Last quarter the bank boosted its profit numbers by releasing $2.9bn in credit reserves, that it had set aside last year in respect of non-performing loans. The Federal Reserve also allowed the resumption of buybacks and dividends. Expectations are high that the economic reopening of the US economy could release more cash from reserves in the form of extra dividends.

BMO Capital Markets analysts expect JPMorgan's near-term outlook to focus on "the cadence of expected credit losses and whether the additional stimulus will reduce (or just delay) cumulative credit losses, capital management, including thoughts around M&A and share buybacks at JPM’s current valuation" as well as "the outlook for reserves releases and macro assumptions underpinning the reserve methodology."

 Big Banks Kick Off First Quarter 2021 Earnings Season

The bank rally has been fueled by expectations for the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

  

JPMorgan Chase & Co NYSE: JPM

Market Reaction Pre-market $151.92 −2.17 (-1.41%)

Highlights

JPMorgan’s release of $5.2 billion in reserves is the biggest sign yet that the U.S. banking industry is now expecting to have fewer loan losses than it did last year, when it set aside tens of billions for defaults anticipated from the coronavirus pandemic. A year ago, the firm had added $6.8 billion to credit reserves. “Overall, this was a great quarter for JPMorgan,” said Octavio Marenzi, CEO of consultancy Opimas. “It is now increasingly clear that the bank over-reserved, and that money is now flowing back into its earnings, concealing some of the weakness in consumer banking.”

  • Fixed income trading produced $5.8 billion in revenue, a 15% increase that exceeded analysts’ estimates by more than $800 million, on activity in securitized products and credit markets. '
  • Equities trading revenue surged 47% to $3.3 billion, a full $1 billion more than estimates, on “strong performance across products.”'
  • JPMorgan, with the world’s biggest Wall Street bank by total revenue, was expected to benefit from robust investment banking fees driven by record issuance of special purpose acquisition companies, which saw more activity in the first quarter than all of 2020, itself a record year.
  • he firm said first-quarter investment banking revenue surged 222%, or a full $2 billion, to $2.9 billion, exceeding the estimate of $2.65 billion.

Most of the quarter’s reserve release came from the bank’s retail division: '

The firm said $3.5 billion was tied to the bank’s credit card borrowers, and another $625 million from home loan borrowers. While that meant that the firm’s consumer and community banking division saw profit surge by $6.5 billion from a year earlier, to $6.73 billion, the bank said that card and mortgage revenue was impacted by lower balances as flush consumers pay down their debts. In the release, CEO Jamie Dimon called loan demand “challenged,” but during a call with reporters Wednesday, ]

Outlook

Dimon struck an optimistic tone for the near-term economic future in the U.S., similar to comments he made this month in his annual shareholder letter.

“With all of the stimulus spending, potential infrastructure spending, continued quantitative easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth,” Dimon said in the release.;

Still, the bank faces an incredibly broad range of outcomes tied to the coronavirus pandemic. 

 

Source: JPM, AlphaStreet

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