Moments ago, JPM – the biggest US bank by assets – became the first bank to report second quarter earnings, which beat expectations with Adjusted EPS of $1.46 (reported EPS of $1.55) on $25.2 billion in non-GAAP revenue ($24.4 billion in reported revenue), which was $1.1 billion higher than in Q1 and $0.7 billion more than a year ago. Wall Street was expecting $1.43 and $24.42 billion in EPS and revenue respectively (although a meet if one uses the actual reported top-line number). Q2 profit fell 1.4%, or less than expected, as fixed-income trading revenue and loan growth jumped.
Net income dropped to $6.2 billion, or $1.55 a share, from $6.29 billion, or $1.54 a share, a year earlier, the New York-based company said Thursday in statement. Revenue climbed 2.8 percent to $25.2 billion. That figure included $3.96 billion from fixed-income trading, a 35 percent increase, and $1.6 billion from equity trading, up 1.5 percent.
While JPMorgan executives have said trading rebounded in April and May, that was before the referendum roiled markets and pushed out expectations for additional U.S. interest-rate increases to at least next year. The delay would extend a post-financial-crisis era of low rates that’s forced banks to rely on expense cuts to cope with stagnant revenue. Citigroup Inc. and Wells Fargo & Co. are scheduled to report results Friday, while Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley are due next week. Analysts estimate the industry will post its fourth-straight profit decline in the second quarter, according to data compiled by Bloomberg. The group saw profits fall 12 percent on a year-over-year basis in the first quarter.
Going back to JPM’s results, the good news was that after an abysmal Q1, sales and trading rebounded in the second quarter, in which Jamie Dimon saw “strong underlying performance,” with record consumer deposits, credit card sales volume, merchant processing volume, “broad” core loan growth, particularly in mortgage, commercial real estate.
This is what Jamie Dimon said:
“JPMorgan Chase continued to perform well in all of our major businesses. We saw strong underlying performance with record consumer deposits (up 10%), credit card sales volume (up 8%), merchant processing volume (up 13%) and broad core loan growth (up 16%) – particularly in mortgage and commercial real estate. Outside of energy, both wholesale and consumer credit quality remained very good.”
Amusingly, JPM noted the incipient FinTech competition and highlighted that it had nearly 25 million active mobile customers, up 18%.
Looking at just the bank’s all important corporate and investment bank results, 2Q trading $5.56b vs est. $5.16b, up 23% Y/Y; while net income rose to $2.5 billion, up $152mm from a year ago. FICC reported $3.96b vs est. $3.57b; Equities $1.6b vs est. $1.59b;Investment banking revenue $1.49b, vs est. $1.49b
- Fixed Income Markets up 35% YoY, driven by higher revenue in Rates, Currencies & Emerging Markets, Credit and Securitized Products
- Equity Markets up 2% YoY
- IB revenue of $1.5B, down 15% YoY, largely driven by lower equity underwriting fees
- Securities Services revenue of $907mm, down 9% YoY
The not so good news was that in Q2 the Fed continued to pressure NIM 2.25%, which came below the estimated 2.31%. However, what JPM lost in margin, it made up for in volume, with average core loans rising 3% Q/Q and 16% Y/Y. JPM aslo reported a record growth in average deposits, up $54 billion, or 10%.
Another recurring question is how did JPM’s loan book perform. Here is what it said:
The provision for credit losses was $1.4 billion, up from $935 million due to reserve increases in the current quarter versus reserve releases in the prior-year quarter, and higher net charge-offs. The Consumer provision reflected an increase in reserves primarily driven by higher loss rates in newer Card vintages, in line with expectations, as well as growth in the Card and Auto portfolios, partially offset by releases for Mortgage Banking and Student loans. The Wholesale provision reflected higher net charge-offs primarily driven by Oil & Gas and Metals & Mining and a reserve build of approximately $50 million, which reflected a net increase of approximately $200 million, driven by one Oil & Gas name in the CIB, and offsetting net releases across the remainder of the portfolio.
Visually:
JPM’s delinquency trends generally remained flat.
JPM provided the following outlook:
- Expect 2016 net interest income to be up ~$2B+ YoY
- Expect 2016 noninterest revenue to be ~$50B, market dependent
- Expect 2016 adjusted expense to be $56B+/-
- Expect 2016 net charge-offs to be ?$4.75B, with the YoY increase driven by both loan growth and Oil & Gas
Overall, a better than expected report, one which JPM urgently needed after last quarter’s poor showing.
Full investor presentation below:
via http://ift.tt/29JGYLs Tyler Durden