Roadmap Ahead of JPMorgan Chase Earnings

April 12th, 2011 by Trefis Team
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JPMorgan Chase (NYSE:JPM) will report its first quarter 2011 earnings on April 13. We expect the bank to report another solid quarter with total revenues of about $24 billion. JPMorgan is one the largest and most diversified banks in the U.S., and competes primarily with other large players like Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Deutsche Bank (NYSE:DB) and Morgan Stanley (NYSE:MS).

We have a price estimate of $48.87 for JPMorgan’s stock, about 5% ahead of market price.

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JPMorgan has a track record of delivering better than estimated earnings. Over the past four quarters, JPMorgan reported earnings per share that have exceeded consensus estimates by 12-15%. Consensus estimates suggest first quarter 2011 earnings per share of $1.17, a significant improvement over Q1 2010 earnings of $0.74. The consensus estimate for Q1 2011 revenue is about $25.8 billion, representing an 8.5% decline vs. Q1 2010. [1]

What to Watch –

JPMorgan’s Global M&A Market Share

In Q1 2011, JPMorgan set a new industry benchmark by singlehandedly providing $20 billion in financing for AT&T’s acquisition of T-Mobile. Rivals will find it difficult to match JPMorgan’s achievement and regulatory limits on lending will also create an obstacle for players large enough to extend such large quantities of capital (like Bank of America and Citigroup). Thus, JPMorgan should remain well sought after for multi-billion dollar deals, which should bolster its global M&A market share.

Net Interest Yield on Credit Card Loans

The CARD Act restricts banks on interest rate increases for late credit card payments. This had an impact on JPMorgan’s net interest yield on credit card loans last year and we expect to see a similar effect carried forward.

Non-Interest Income as a Percentage of Average Deposits

JPMorgan, along with other banks, introduced new fees on checking accounts after the Dodd-Frank financial reform bill restricted banks from charging merchants processing fees on debit card transactions. Essentially, the bank is trying to earn more revenues from its existing customer base by pushing them to use more products and services. This will translate into higher non-interest income, which we represent as a percentage of average deposits.

See our full analysis of JPMorgan’s stock here.

Notes:
  1. Earnings Preview : JPMorgan Chase & Co. (NYSE: JPM) First Quarter 2011, Newsystocks.com [↩]