Multinational investment bank JPMorgan Chase & Co. (NYSE: JPM) has disappointed investors with its earnings results for the second quarter of 2022. JPMorgan’s earnings are down from the prior year and missed analysts’ estimates. Further, revenues, too, lagged the consensus estimate.
Shares of JPMorgan were down 3.5% on July 14, post the earnings release.
JPMorgan’s Results in Detail
Diluted earnings came in at $2.76 per share in the reported quarter, down 27% year-over-year, lagging estimates of $2.89 per share. The second-quarter results also include a net credit reserve build of $428 million, against a net release of $3 billion in the previous year. The bank reported revenues of $30.72 billion, up 1% year-over-year, missing analysts’ expectations of $31.74 billion.
The multinational investment bank witnessed a 19% rise in its net interest income (NII) to $15.2 billion in the second quarter of 2022. Excluding markets, NII came in at $13.7 billion, up 26%. This upside can be attributed to higher rates and balance sheet growth.
Meanwhile, noninterest revenue declined 12% to $16.4 billion, largely due to sluggish Investment Banking fees and softer Card income in Consumer & Community Banking (CCB), which were partially offset by higher Corporate & Investment Bank (CIB) Markets revenue.
Further, noninterest expenses rose 6% to $18.7 billion on the back of consistent investments in the business, including technology and marketing, and higher structural expenses, which were partially offset by lower revenue-related compensation.
The provision for credit losses came in at $1.1 billion, including $657 million of net charge-offs and a net reserve build of $428 million.
JPM CEO Warns Investors
JPMorgan CEO Jamie Dimon has acknowledged that the United Stated is witnessing economic growth, along with decent hiring and consumer spending conditions. However, amid these positives, he has warned stakeholders about the macroeconomic challenges as well.
He said, “Geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road.”
Wall Street is Cautiously Optimistic about JPM
According to TipRanks, the Street is cautiously optimistic about JPM stock and has a Moderate Buy consensus rating based on 11 Buys, six Holds, and two Sells. JPM’s average price forecast of $143.78 implies 33.1% upside potential to current levels. Shares of the company have declined 33.1% so far this year.
Further, financial bloggers are 84% Bullish on JPM, compared to the sector average of 66%.
Tough Times Ahead for JPM?
The CEO’s comments and the weakness in the earnings results point toward challenging times ahead. High inflation levels, Fed’s aggressive stance on increasing interest rates, the ongoing Russia-Ukraine conflict, and recession fears could lead to sustained market volatility. Thus, these macroeconomic challenges may continue to hurt the bank’s global International banking fees, due to drying M&A deals and hindered capital raising activities.
However, the modest loan growth and increased trading income should bode well for the company. Also, the strength in consumers’ discretionary spending using credit cards and increased deposits can remain positives for the bank.
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