Post Earnings Coverage as JP Morgan Tops Market Estimates

LONDON, UK / ACCESSWIRE / July 15, 2016 / Active Wall St. announces its post-earnings coverage on JPMorgan Chase & Co (NYSE: JPM). The money center bank announced its Q2 FY 2016 financial results on July 14, 2016. The largest U.S. bank by assets kicked off the banking industry earnings season with stronger than expected earnings result as fixed-income trading revenue and loan climbed, underlying strength in the U.S. economy. Register with us now for your free membership at:

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Earnings Reviewed

For the period ending June 30, 2016, JPMorgan reported net income of $6.2 billion, or $1.55 per share, from $6.29 billion, or $1.54, in the year ago period. Excluding accounting adjustment and a legal benefit, earnings came at $1.46 per share, $0.3 higher than analysts’ estimate. The bank surprised many by posting a modest increase in revenue, fueled in part by strong trading activity, as well as loan growth. Revenue climbed 2.8% to $25.2 billion, beating the $24.5 billion market expectation. A majority of the bank’s revenue gain in Q2 FY16 came from trading bonds and currencies, which rose 35%, pushing total trading revenue up to $5.56 billion from $4.51 billion in Q2 FY15.

For Q2 FY16, earnings at the corporate and investment bank, climbed 6.5% to $2.49 billion as revenue rose 5.1% as compared to Q2 FY15. Investment banking revenue declined 15% to $1.5 billion on lower equity-underwriting fees. The bank’s return on equity for Q2 FY16 was 10%. Non-interest expenses declined 6% to $13.6 billion on expense reduction and lower legal bills.

Lending Grows in Improving Economy

JPMorgan said that it was experiencing broad demand for loans from consumers and businesses in the U.S. The bank reported that average core loans increased 16% on y-o-y basis. The New York headquartered bank has expanded its loan book by double digits, for three straight quarters, its best run since 2009. JPMorgan’s loan portfolio, excluding allowances for bad loans, grew to $858.6 billion, the largest in the bank’s history.

Brexit

Industry experts were keenly watching Banks’ comments about Brexit amid concerns that the June 23 referendum could hamper growth in the U.K. and Europe, put further downward pressure on interest rates, and cause costly disruptions in London’s financial industry, where big banks like J.P. Morgan have their European headquarters. Bank’s stocks plummeted after the vote and yields on 10-year Treasury notes plunged to a record.

JPMorgan’s CFO, Marianne Lake, stated that the bank views Brexit as a political and economic challenge but not a financial crisis. Ms. Lake further added that the company would decide on any moves only after the exact terms of Britain’s exit had been negotiated. The company’s CEO, James Dimon, noted that the bank plans to keep serving clients across Europe, even if it becomes more expensive and urged politicians in the U.K. and Europe to be “sensible” in their negotiations.

Increase in Headcount

JPMorgan’s headcount rose in Q2 FY16, a reversal of recent trends at the bank. The bank also reported a small increase in compensation. On July 12, 2016, Mr. Dimon, wrote an article in The New York Times announcing that the bank would be giving pay raises to its lowest-salaried employees. Mr. Dimon attributed the move on his optimistic outlook and to allow the banks employees to share in the economic growth. A majority of banks had reduced headcount once again in Q1 FY16 to offset the drop in capital markets and trading that have impacted their top lines.

Share Repurchase and Dividend

JPMorgan returned $4.4 billion to its shareholders in Q2 FY16 in the form of $2.6 billion of net repurchases of its shares and common dividend of $0.48 per share.

Stock Performance

Signs of growth in JPMorgan, the first of the big banks to announce its earnings results for this quarter, appeared to have pleased investors. JPMorgan’s share gained 1.52% to close at $64.12 with a trading volume of 28.91 million shares. The bank’s stock has gained 4.09% in the past one month and 3.24% in the previous three months.

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