PYMNTS-MonitorEdge-May-2024

Sigh Of Relief On JPMorgan Results

Nobody expected much, so this was a relief.

With the first shot fired across the banking industry’s earnings season, JPMorgan cleared some lowered bars and investors bid shares up as a result.

The company put up earnings per share that fell year over year – no real surprise – but managed to beat expectations by 9 cents, at $1.35. That number and that beat, however, came in against a bar that had been ratcheted down into the earnings report.

The latest per share was down from $1.45 in the same period last year. The stock, up 3 percent intraday as of this writing, clearly is moving ahead on a relief rally.

Overall revenues were down 3.4 percent year over year to about $23.2 billion.  The adjusted number, which excludes certain items, was nearly $24.1 billion, which bested the Street at $23.4 billion. The ratios were OK, but of course down on continued top and bottom line pressure – as return on equity (which is a rough profitability measure) came in at 9 percent, off from 11 percent last year. The net interest margin was slightly higher, at 2.3 percent, compared to 2.07 percent last year. The rate hike that just came courtesy of the Fed helped spur that number a little.

Some negative data points: investment banking and trading. Oil and gas. No one expected good news from these segments and that is exactly what was delivered – a sticky wicket of declines. The trading revenue was off overall by 11 percent to $5.2 billion from $5.8 billion last year. The culprit, not surprisingly, was a decline in debt and equity capital markets activity. And with a dearth of underwriting activity, investment banking fees slipped 25 percent year over year to $1.3 billion.

Bad loan provisions continue to increase, with a set aside of $1.8 billion in the first quarter alone, which is a boost from the $1.2 billion that had been reserved just in the fourth quarter. Whether that’s a prudent move – in terms of being conservative – remains to be seen (and reserves can be reversed to flow back into net income). The bank, like many of its brethren, has had and continues to have downgrades tied to energy and mining portfolios.

One bright spot came in the consumer operations, where profits grew year over year to $2.5 billion, from $2.2 billion last year. In addition, the mortgage business slowed as a result origination declines, off 9 percent year over year, but profitability improved.

PYMNTS-MonitorEdge-May-2024