vrijdag 14 juli 2017

JPM Beats Boosted By Lending Despite Trading Miss As FICC, Sales & Trading Revenues Tumble

Launching Q2 earnings season, moments ago JPM reported Q2 an adjusted record Net Income of $7.03 billion and EPS of $1.82, which however included an 11 cent legal benefit, beating expectations $1.57 and 27 cents higher than a year ago, on "managed" revenue of $26.4BN, beating consensus expectations of $25.1BN...


JPM reported average core loans up 8% Y/Y with net interest income also 8% higher to $12.5bn, “primarily driven by the net impact of rising rates and loan growth" even as average NIM missed. Commenting on the result, Jamie Dimon said: “We continued to post very solid results against a stable-to-improving global economic backdrop. The U.S. consumer remains healthy, evidenced in our strong underlying performance in Consumer & Community Banking. Loans and deposits continue to grow strongly, and card sales and merchant processing volumes were up double digits, reflecting our consistent investment in the business. In the Corporate & Investment Bank, we maintained our leadership in Banking, while Markets revenue was down amid lower volatility and client activity.” Dimon concluded:“We are also pleased to announce increases to our capital return plans while continuing to invest in our businesses for long-term profitability, reflecting the financial strength of our company and the significant capital and liquidity improvements we have made over the past several years”. Some other headline data:
*2Q Basel III common equity Tier 1 ratio 12.5%, above the est. 12.42%, with a 12% return on capital
*Q2 Adjusted expense of $14.4BN and adjusted overhead ratio of 56%
*2Q compensation expenses $7.71 billion, estimate $7.96 billion
*$4.5BN returned to shareholders in 2Q17, including $2.7B of net repurchases
*Common dividend of $0.50 per share
*Average core loans up 8% YoY and 2% QoQ
JPM also reported that its provision for credit losses in Q2 was $1.22BN, below the $1.33BN expected as loan consumer reserves were $9.2BN in Q2, up $252MM to $9.2BN while wholesale reserves eclined by $241MM to $5.3BN. More importantly, in light of the collapse in the yield curve, JPM announced that in Q2 its "net yield on interest-earning assets" or NIM declined from 2.33% in Q1 to 2.31% in Q2, below the 2.37% expected...


However, despite the record top and bottom line, JPM's sales and trading disappointed again, with JPM reporting total markets revenue of $4.8 billion, down 14% as both FICC and equity sales & trading revenue for Q2 quarter that missed estimates.
* 2Q FICC sales & trading revenue $3.22 billion, down 19% Y/Y, missing the estimate of $3.25 billion due to "due to reduced flows driven by sustained low volatility and tighter credit spreads, against a strong prior year"
*2Q equities sales & trading revenue $1.59 billion, estimate $1.62 billion
On the other hand, 2Q investment banking revenue $1.70 billion, up 14% Y/Y and beating expectations of $1.65 billion. On the expense side, JPM reported Corporate and IBank overhead of $4.8B, down 5% YoY, driven by lower compensation expense. JPM also reported average VaR of only $27, well below the $44 reported a year ago. Overall, corporate and IBank revenue fell 3% Y/Y to $8.9 billion, although due to lower overhead net income rose 9% to $2.7 billion. As noted above, Jamie Dimon blamed "lower volatility, client activity" for the disappointing print...

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