JPMorgan: earnings boom and solid revenue growth with NII leap. There is the issue of NPLs and provisions. CEO Jamie Dimon confident in the resilience of the US economy.
JPMorgan to test the quarterly: here are the numbers on profits, turnover, NII and provisions of the banking giant made in the USA.
The Wall Street giant led by CEO Jamie Dimon announced it finished the second quarter of the year with earnings per share, EPS, of $4.75, compared to $2.76 per share in the same period last year, well above even the $3.97 per share expected from the consensus of the analysts interviewed by FactSet.
JPMorgan revenue climbed to $41.307 billion, compared to $30.715 billion in the same period last year and much better even than the $38.63 billion expected by the consensus.
Provisions made by the US’s number one bank by asset value to cover NPL losses amounted to $2.899 billion, more than doubled (+163%) compared to $1.101 billion in the second quarter of 2022.
The figure was slightly more than $2.72 billion which had been predicted by the analysts interviewed by StreetAccount.
JPMorgan confirmed so the NPL node, which is distressing all American banks in general, but also European ones.
At the same time, the bank confirmed that it has all it takes to continue growing.
JPMorgan: there is also the First Republic effect on profits
Among other things, the galaxy of assets has also grown, with the acquisition of the US regional bank which crashed in the months in which the crisis in the sector exploded in the United States and also in Europe: First Republic Bank, taken over by the giant managed by Jamie Dimon after blown up at the end of April.
The acquisition took place in May, allowing the US giant to acquire First Republic loans worth $173 billion and deposits of $92 billion.
JPM has however also witnessed some hurdles, such as aDeclining fees in its investment banking division down 6% year over year to $1.5 billion.
Its turnover is also down equity and fixed income trading divisions.
Today’s results are the first results released by JPMorgan following the acquisition of the American regional bank First Republic.
Profit jump +67% with First Republic, without up 40%
With regard to the other details of the quarterly report, which refers to the period between the months of April and June, it should be highlighted the jump in JPMorgan’s profit, soaring by 67%, to $14.5 billion, the equivalent of $4.75 per share.
Excluding the impact of the First Republic acquisition, earnings jumped 40%, to $4.37 per share, confirming itself above the $3.98 per share estimated by analysts.
Very good too the performance of the interest margin (NII) which, thanks to rate hikes launched by Jerome Powell’s Fed, rose by 44% to $21.9 billion.
The sharp rise in the NII allowed the turnover of the American giant to jump by 34% on an annual basis, rising to $41.3 billion.
The reaction of the title to the publication of the quarterly was immediate: JPMorgan advances on Wall Street up to +3% approximately in premarket bargaining.
It should be remembered that the shares of JPMorgan they gained 11% this year, significantly outperforming the trend of the SPDR S&P Bank ETF (KBE) which, over the same period, fell by 15%.
JPMorgan surprises positive, outlook WS banks earnings not very comforting
For the quarterly season of the US banks, analysts’ forecasts are not the most comforting.
A few days ago, in particular, the article in the Financial Times “Big US banks to report largest jump in loan losses since pandemic“launched a warning on the quarterly reports of the great Wall Street giants, fearing a sharp jump in NPLs, ergo in impaired loans.
On the other hand, on risk of strong growth in NPLs, several alerts were also triggered for banks in the euro area and for Italian banks:
on one side, rate hikes launched by Jerome Powell’s Fed and Christine Lagarde’s ECB, in specific cases, they have provided strong support to the profitability of banks, in particular by increasing the respective NII parameters, i.e. interest margins; on the other side, the boom in financing costs with which households and businesses that have taken out a mortgage or are indebted in any other form are grappling, has triggered fears everywhere that banks will encounter many difficulties in being reimbursed for the loans they have disbursed.
The risk is that in fact, the counterparties defaultor in any case fail to honor the financial commitments undertaken, thus affecting the banks’ balance sheets.
Particularly shocking is Bloomberg’s outlook, according to which the six main US Big Banks JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs e Morgan Stanley — should announce for the second quarter of this year overall loan-related write-downs of $5 billion.
Just to deal with any future jumps in NPLsthe giants themselves are expected to set aside up to $7.6 billion, almost double compared to the values of the same quarter last year.
It must be said that forecasts for NPLs were particularly pessimistic just looking at JPMorgan which has in fact set aside more reserves than expected, at a value of approximately $2.9 billion.
Despite the challenges, JPMorgan still managed to positively surprise the markets again. Optimism towards the future has been remarked since CEO Jamie Dimon:
“The US economy continues to be resilient. Consumer budgets continue to pour in healthy, and consumers are still spending, albeit somewhat weaker. The labor market has slowed somewhat, but employment growth remains solid. That said, there are still major immediate risks.”