JPMorgan Leads Big Banks in Earnings

JPMorgan Chase, America’s largest bank, exceeded analysts’ expectations in reporting second-quarter earnings for 2019. Analysts predicted earnings would rise 9% to an average $2.50 per share, actual earnings amounted to $2.82.

This was due largely to a $768 million income tax benefit that translated to a 23-cent gain in EPS. The company also enjoyed a one-time gain of 8 cents on the initial public offering of Tradeweb. Earnings were also boosted by modest loan growth and higher mortgage banking fees along with a 4% increase in home lending revenues that continue to rise due to higher mortgage origination volume.

The bank saw improvements in credit card income as well, which grew by 25% due to an increase in its card loan portfolio. Overall, consumer banking revenue increased by 11% to $13.8 billion, while fixed income trading and equity trading fell by 3% and 12%.

When it comes to the competition, both of the other big-three banks, Wells Fargo and Goldman Sachs, also reported better-than-expected earnings. Goldman Sachs came in at $5.81 and its stock rose by 1.9% after its report, while Wells Fargo recorded a 7% increase that amounted to $1.16 EPS and a 3% drop in stock value.

JPMorgan saw a dip in stock value during early Tuesday trading, with prices dropping to $113.42, but the price rebounded to $115.08 within the hour. These losses came as investors reacted to the news that JPMorgan trimmed its forecast for 2019 net interest income to $57.5 billion from $58 billion.

This scaling-back of the forecast for the second part of 2019 is due to expected rate cuts by the Federal Reserve. The central bank is expected to begin with a 0.25 percentage-point reduction later this month.

During the earnings call, JPMorgan CEO Jamie Dimon and CFO Jennifer Piepszak confirmed that the bank plans to aggressively repurchase stock in the year ending June 2020, with $29.4 billion in projected buybacks. This would represent about 8% of its shares outstanding, compared to 5% that the company retired in the past year.

Dimon said JPMorgan will increase its heavy investment into technology, projecting that the bank will spend about $11.5 billion on tech by the end of the year. The CEO predicted that the US GDP would 2.5% this year.

Asked about the effects of the current political and economic environment, Dimon responded with an optimistic perspective. “It’s not bad,” he said. “Uncertainty is a constant. Geopolitical tension is a constant.”