Banker (JPM Earnings)
JPMorgan Chase (JPM) will announce its Q4 (Dec) results tomorrow before the market opens, followed by a conference call at 8:30am ET.
According to the current FactSet consensus, adjusted EPS is expected to be $4.09, representing a 34% year-over-year increase, while revenue is projected at $41.91 bln, reflecting 9% growth.
Shares of JPM surged to record highs following its robust Q3 performance, which was further boosted by the U.S. presidential election. Even before the bank’s Q3 report, shares were already up 15%.
A notable highlight of Q3 was a sizable earnings beat. Since the company’s miss in Q4 2023, JPM has delivered healthy bottom-line beats each quarter. Revenue growth was solid at 6.5% year over year, despite being compared to an impressive +24.4% jump in the prior year. Non-interest revenue drove much of this growth with an 11% climb, while net interest income, excluding the Markets segment, inched 1% higher.
JPM divides its operations into three main segments: Consumer & Community Banking (CCB), Commercial & Investment Bank (CIB), and Asset & Wealth Management (AWM). Of these, CCB was the weakest link last quarter, as net revenue slipped 3% year over year, primarily due to an 11% decline in Banking & Wealth management revenue. This decrease stemmed from lower net interest income because of margin compression on deposits and reduced deposit balances. One of JPM’s challenges in this segment has been the allure of money market accounts offering more competitive yields. However, the Fed’s rate cuts have given JPM hope that this headwind has peaked.
In CIB, net revenue rose 8% last quarter, bolstered by strength in both Banking & Payments and Markets & Securities Services. Commercial banking continues to benefit from healthy M&A activity. Even though JPM expressed optimism around its M&A pipelines, management also cautioned that regulatory and geopolitical uncertainties remain. Meanwhile, AWM posted a 9% increase in net revenue in Q3, aided by higher average market levels and robust net inflows.
A key metric to watch is JPM’s consolidated provision for credit losses. In the previous quarter, this provision stood at $3.1 billion, driven by $2.1 billion in net charge-offs and a $1.0 billion net reserve build. Net charge-offs of $2.1 billion marked a $590 million increase, primarily linked to the Card Services division.
Finally, CEO Jamie Dimon’s perspective is always closely monitored. This week, he conveyed a “cautiously pessimistic” outlook on the U.S. economy in an interview with CBS News, suggesting a generally negative sentiment. It would not be surprising to see a similarly cautious tone in his remarks tomorrow.
TECHS:
JPM’s stock is trading just a few dollars below its late-November record highs.
Expectations are therefore a bit elevated. To meet these high expectations, JPM likely needs to exceed consensus estimates on both earnings and revenue, along with demonstrating strong performance across its core segments. A significant jump in credit loss provisions could raise alarms, although the increase last quarter did little to dampen investor enthusiasm.
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