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 Wednesday 13 April 2016

PM Bulletin: JP Morgan Chase

 

 

JP Morgan (JPM) announced its first quarter earnings ahead of the US open today. It is the first of the US banking giants to post results since the Federal Reserve raised rates in December last year. For this reason alone the event was highly anticipated. Earnings came in at $1.35 per share on expectations of $1.26. Total revenue was $24.08 billion which was well above the consensus expectation of $23.4 billion. The stock gapped higher on the open and was up over 3% at the time of writing.

So investors were cheering on JP Morgan in much the same way they did Alcoa (AA) after the close on Monday night. Yet it is worth noting that JP Morgan’s earnings per share were down 6.9% from the same time last year while its revenue was down 6.7%. The bank's net income fell to $5.52 billion in the first quarter from $5.91 billion a year earlier. In other words the results were pretty dire, but much better than the beaten-down Wall Street expectations. And after all, that’s all that traders are really bothered about these days. Forget the fact that you can’t hope to grow an economy without healthy businesses which are managing to increase revenues and earnings. All that matters is that you have a central bank behind you that will do everything in its power to keep liquidity flowing into the financial sector.

Yet the US banking sector had had a torrid start to the year as can be seen from JP Morgan’s year-on-year comparisons and its chart – see below. Even after today’s bounce JPM is still around 13% below its July high of $70.65. As of this afternoon the broader US market (as measured by the S&P500) is now less than 3% adrift from its all-time high of 2,137 hit back in May last year. We’ll learn more about the sector tomorrow when Bank of America and Wells Fargo report. It will be interesting to see if investors continue to feel safe buying up stocks of companies that beat expectations but are unable to show earnings growth.




   

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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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