JPMorgan Chase
It's similar to what the employment data is saying - that the U.S. economy is on firm footing with more than a million jobs added during Q2, but the stock market and other forward-looking indicators are convinced that a recession is inevitable. Unfortunately for investors looking to gain clarity, little was provided as the bank's core business saw a 10% gain, but this was eroded by weakness on Wall Street and increasing its loan-loss reserves.
Inside the Numbers
In Q2, the bank reported $2.76 per share in earnings which fell short of expectations of $2.88 per share. This was a 28% drop from last year's net income. Revenue also missed expectations at $31.6 billion vs. $31.9 billion. This was 1% better than last year due to higher rates.
The major reason for the initial bearish reaction was the suspension of its share buybacks and the need to increase capital reserves. Another was the weak performance of Wall Street operations due to fewer IPOs and M&A activity with some fearing that asset write-downs are likely if financial conditions continue to get tighter.
Investment banking revenue was down 54% to $1.65 billion, below estimates of $1.9 billion. Due to market volatility, fixed income trading revenue was up 15% to $4.7 billion, although this fell short of analysts' estimates.
Non-Wall Street operations remained quite strong with a nearly 10% increase in deposits, lending, and net interest income. Further, the company didn't see any sign of a spike in consumer or small business defaults. Not surprisingly, mortgage demand and refinancing collapsed due to high rates.
One interesting portion of the conference call was CEO Jamie Dimon's criticism of the Federal Reserve stress test which he sees as being unfairly restrictive. According to Dimon, the Fed is making the bank prepare for scenarios that are more extreme than 2008. He also said that JPMorgan barely lost any money in 2008 and that he would be aggressively buying back shares at the current valuation, instead, he is forced to boost reserves.