Last week, some of Wall Street’s banking heavyweights delivered Q2’s financials and so did the largest of them all, J.P. Morgan (JPM). But investors weren’t impressed with the banking giant’s performance or CEO Jamie Dimon’s commentary, for that matter.
Amounting to only the second time the company missed on both top-line-and bottom-line expectations since 2020, JPM delivered revenue of $31.63 billion – a 1% year-over-year increase – vs. the $31.95 billion analysts expected. Profit dropped by 28% from the same period a year ago to $8.65 billion – translating to EPS of $2.76, falling short of the $2.88 Wall Street had in mind.
Investment banking revenue dropped by over $2 billion year-over-year in what represented the last 5 quarters’ weakest display for the corporate and investment business. That, however, was countered by the non-Wall Street segments, which did well, as deposits increased and debts are continuing to be repaid by borrowers.
Further balancing out the negative headline results, for the outlook, the company updated its FY2022 guidance, which now calls for net interest income (NII) of ~$58 billion, up from the prior $56 billion as the bank expects to reap the rewards of higher interest rates.
However, investors weren’t too pleased with CEO Jamie Dimon’s somber remarks on his near-term forecast for the global economy, with the usual suspects of “geopolitical tension, high inflation, waning consumer confidence” all getting an honorable mention. Additionally, the company said that in order to accrue capital to ready itself for higher regulatory capital needs in 2023 and 2024, it is putting on hold share repurchases for now.
Scanning the print, Baird analyst David George thinks the display was decent enough.
“Core results were fine with a much lower bar in Q222, driven by solid NII growth, loan growth trends, and credit costs, partially offset by weakness in IB fees,” the analyst explained. “Benefits from maturing investments/market share gains and superior credit risk management enabled JPM to weather the economic downturn better than most peers, and the bank is well positioned to benefit from higher rates.”
That said, the analyst highlights a preference for “other large-cap names,” and rates JPM a Neutral along with a $150 price target. The Baird analyst might be on the sidelines, but he might as well have said Buy; the figure suggests shares will climb 34% higher in the year ahead. (To watch George’s track record, click here)
On Wall Street, 6 other analysts join Geroge on the fence but with an additional 11 Buys and 1 Sell, the stock claims a Moderate Buy consensus rating. Going by the $140.21 average price target, shares have room for ~25% growth over the coming months. (See JPM stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
