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JPMorgan's (JPM) Q2 Earnings Top Estimates on Solid IB, Trading
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High interest rates, the resurgence of the investment banking (IB) business and solid markets revenues drove JPMorgan’s (JPM - Free Report) second-quarter 2024 adjusted earnings to $4.40 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.19.
The results excluded a $2.04 per share net gain related to Visa shares, an 18 cents per share donation of Visa shares to pre-fund contributions to the company’s Foundation and 14 cents per share net investment securities losses. After including these one-time items, earnings were $6.12 per share.
As expected, the IB business rebounded. Equity underwriting fees jumped 56% and debt underwriting fees grew 51%. Also, advisory fees surged 45%. Overall, total IB fees were up 50% from the prior-year quarter to $2.37 billion.
Higher interest rates, decent consumer spending and a decent loan balance (up 2% year over year) supported NII during the quarter. Management reiterated its NII guidance of approximately $92 billion for this year compared with $89.3 billion reported in 2023.
Among other positives, Consumer & Community Banking average loan balances were up 10% year over year. Further, debit and credit card sales volume increased 7%.
Mortgage fees and related income jumped 25% to $348 million. We had projected the metric to be $284.5 million.
Markets revenues grew 10% to $7.8 billion. Specifically, fixed-income markets revenues were up 5% to $4.8 billion, while equity trading numbers rose 21% to $3 billion. Our estimates for equity and fixed-income markets revenues were $2.29 billion and $4.75 billion, respectively.
During the quarter, operating expenses witnessed a rise. Management expects adjusted non-interest expenses to be roughly $92 billion this year. The figure includes the increase in the FDIC special assessment in the first quarter and the Foundation contribution in the second quarter.
Jamie Dimon noted, “While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks.” He, further, said, “Inflation and interest rates may stay higher than the market expects. And finally, we still do not know the full effects of quantitative tightening on this scale.” Because of these factors, the company reported a jump in provision for credit losses.
The performance of JPMorgan’s business segments, in terms of net income generation, was solid. All segments, except for Consumer & Community Banking, witnessed a rise in net income on a year-over-year basis. Overall, net income rose 25% to $18.15 billion and included above mentioned one-time items. We had projected net income to be $17.84 billion.
Revenues Jump, Costs Rise
Net revenues, as reported, were $50.2 billion, up 22% year over year. This included $7.9 billion of one-time gain on the sale of Visa shares. The top line outpaced the Zacks Consensus Estimate of $45.67 billion.
NII grew 4% year over year to $22.75 billion. This was driven by higher rates, higher revolving balances in Card Services and the impact of the balance sheet mix, partially offset by lower deposit balances and deposit margin compression. Our estimate for NII was $22.91 billion.
Non-interest income jumped 37% to $28 billion. Excluding the $7.9 billion net gain related to Visa shares and the estimated bargain purchase gain associated with First Republic of $2.7 billion in the prior-year quarter, non-interest income grew 14%. Our estimate for non-interest income was $19.48 billion and did not include net gain on Visa shares.
Non-interest expenses (on a managed basis) were $23.71 billion, increasing 14%. Excluding the $1 billion donation of Visa shares to pre-fund contributions to the company’s Foundation, expenses soared 9%. This upswing was due to a rise in all cost components. We had projected non-interest expenses to be $23.08 billion.
Weakening Credit Quality
Provision for credit losses was $3.05 billion, up 5% from the prior-year quarter. Our estimate for the metric was $2.58 billion.
Net charge-offs (NCOs) jumped 58% to $2.23 billion. Also, as of Jun 30, 2024, non-performing assets (NPAs) were $8.42 billion, up 7%.
Solid Capital Position
Tier 1 capital ratio (estimated) was 16.7% at the second quarter-end, up from 15.4% in the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 15.3%, up from 13.8%. Total capital ratio was 18.5% (estimated), up from 17.3%.
Book value per share was $111.29 as of Jun 30, 2024, compared with $98.11 a year ago. Tangible book value per common share was $92.77 at the end of June 2024, up from $79.90.
Capital Distribution Update
During the reported quarter, JPMorgan repurchased 27 million shares for $5.3 billion.
Further, following the clearance of the 2024 stress test, JPMorgan announced plans to hike dividends by 8.7% to $1.25 per share and authorized a new share repurchase program of $30 billion, effective Jul 1, 2024.
Our Viewpoint
New branch openings, strategic acquisitions, a global expansion plan, high interest rates and decent loan demand are likely to keep supporting JPMorgan’s revenues. Further, a rebound in capital markets business will act as a tailwind. However, a potential economic slowdown and mounting expenses are near-term concerns.
JPMorgan Chase & Co. Price, Consensus and EPS Surprise
Earnings Dates & Expectations of Other Major Banks
PNC Financial Services (PNC - Free Report) is scheduled to announce second-quarter 2024 numbers on Jul 16.
Over the past 30 days, the Zacks Consensus Estimate for PNC’s quarterly earnings has moved marginally north to $3.00. This implies a 10.7% fall from the prior-year reported number.
Bank of America (BAC - Free Report) is slated to report second-quarter 2024 numbers on Jul 16.
Over the past month, the Zacks Consensus Estimate for BAC’s quarterly earnings has been revised 1.3% lower to 79 cents. This indicates a 10.2% decline from the prior-year quarter.
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JPMorgan's (JPM) Q2 Earnings Top Estimates on Solid IB, Trading
High interest rates, the resurgence of the investment banking (IB) business and solid markets revenues drove JPMorgan’s (JPM - Free Report) second-quarter 2024 adjusted earnings to $4.40 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.19.
The results excluded a $2.04 per share net gain related to Visa shares, an 18 cents per share donation of Visa shares to pre-fund contributions to the company’s Foundation and 14 cents per share net investment securities losses. After including these one-time items, earnings were $6.12 per share.
As expected, the IB business rebounded. Equity underwriting fees jumped 56% and debt underwriting fees grew 51%. Also, advisory fees surged 45%. Overall, total IB fees were up 50% from the prior-year quarter to $2.37 billion.
Higher interest rates, decent consumer spending and a decent loan balance (up 2% year over year) supported NII during the quarter. Management reiterated its NII guidance of approximately $92 billion for this year compared with $89.3 billion reported in 2023.
Among other positives, Consumer & Community Banking average loan balances were up 10% year over year. Further, debit and credit card sales volume increased 7%.
Mortgage fees and related income jumped 25% to $348 million. We had projected the metric to be $284.5 million.
Markets revenues grew 10% to $7.8 billion. Specifically, fixed-income markets revenues were up 5% to $4.8 billion, while equity trading numbers rose 21% to $3 billion. Our estimates for equity and fixed-income markets revenues were $2.29 billion and $4.75 billion, respectively.
During the quarter, operating expenses witnessed a rise. Management expects adjusted non-interest expenses to be roughly $92 billion this year. The figure includes the increase in the FDIC special assessment in the first quarter and the Foundation contribution in the second quarter.
Jamie Dimon noted, “While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks.” He, further, said, “Inflation and interest rates may stay higher than the market expects. And finally, we still do not know the full effects of quantitative tightening on this scale.” Because of these factors, the company reported a jump in provision for credit losses.
The performance of JPMorgan’s business segments, in terms of net income generation, was solid. All segments, except for Consumer & Community Banking, witnessed a rise in net income on a year-over-year basis. Overall, net income rose 25% to $18.15 billion and included above mentioned one-time items. We had projected net income to be $17.84 billion.
Revenues Jump, Costs Rise
Net revenues, as reported, were $50.2 billion, up 22% year over year. This included $7.9 billion of one-time gain on the sale of Visa shares. The top line outpaced the Zacks Consensus Estimate of $45.67 billion.
NII grew 4% year over year to $22.75 billion. This was driven by higher rates, higher revolving balances in Card Services and the impact of the balance sheet mix, partially offset by lower deposit balances and deposit margin compression. Our estimate for NII was $22.91 billion.
Non-interest income jumped 37% to $28 billion. Excluding the $7.9 billion net gain related to Visa shares and the estimated bargain purchase gain associated with First Republic of $2.7 billion in the prior-year quarter, non-interest income grew 14%. Our estimate for non-interest income was $19.48 billion and did not include net gain on Visa shares.
Non-interest expenses (on a managed basis) were $23.71 billion, increasing 14%. Excluding the $1 billion donation of Visa shares to pre-fund contributions to the company’s Foundation, expenses soared 9%. This upswing was due to a rise in all cost components. We had projected non-interest expenses to be $23.08 billion.
Weakening Credit Quality
Provision for credit losses was $3.05 billion, up 5% from the prior-year quarter. Our estimate for the metric was $2.58 billion.
Net charge-offs (NCOs) jumped 58% to $2.23 billion. Also, as of Jun 30, 2024, non-performing assets (NPAs) were $8.42 billion, up 7%.
Solid Capital Position
Tier 1 capital ratio (estimated) was 16.7% at the second quarter-end, up from 15.4% in the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 15.3%, up from 13.8%. Total capital ratio was 18.5% (estimated), up from 17.3%.
Book value per share was $111.29 as of Jun 30, 2024, compared with $98.11 a year ago. Tangible book value per common share was $92.77 at the end of June 2024, up from $79.90.
Capital Distribution Update
During the reported quarter, JPMorgan repurchased 27 million shares for $5.3 billion.
Further, following the clearance of the 2024 stress test, JPMorgan announced plans to hike dividends by 8.7% to $1.25 per share and authorized a new share repurchase program of $30 billion, effective Jul 1, 2024.
Our Viewpoint
New branch openings, strategic acquisitions, a global expansion plan, high interest rates and decent loan demand are likely to keep supporting JPMorgan’s revenues. Further, a rebound in capital markets business will act as a tailwind. However, a potential economic slowdown and mounting expenses are near-term concerns.
JPMorgan Chase & Co. Price, Consensus and EPS Surprise
JPMorgan Chase & Co. price-consensus-eps-surprise-chart | JPMorgan Chase & Co. Quote
JPMorgan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Major Banks
PNC Financial Services (PNC - Free Report) is scheduled to announce second-quarter 2024 numbers on Jul 16.
Over the past 30 days, the Zacks Consensus Estimate for PNC’s quarterly earnings has moved marginally north to $3.00. This implies a 10.7% fall from the prior-year reported number.
Bank of America (BAC - Free Report) is slated to report second-quarter 2024 numbers on Jul 16.
Over the past month, the Zacks Consensus Estimate for BAC’s quarterly earnings has been revised 1.3% lower to 79 cents. This indicates a 10.2% decline from the prior-year quarter.