What To Expect From JPMorgan’s Q2 Results

by Trefis Team
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JPMorgan Chase (NYSE:JPM) kicks off the earnings season for U.S. banks on Friday, April 13. We expect JPMorgan to report earnings of about $2.31 a share on revenues of $27 billion for the quarter, based on our detailed interactive model for JPMorgan’s revenues and expenses for the quarter. This compares to consensus estimates of $2.22 for JPMorgan’s EPS and $27.6 billion for its revenues. The three key trends that contribute to our forecast results are a notable increase in net interest income, lukewarm securities trading revenues and higher card fees.

As JPMorgan’s business model includes a diverse set of financial services, the bank’s results should provide insights into the overall trends that affected each of these services over the quarter. We maintain a $118 price estimate for JPMorgan’s stock, which is about 10% ahead of its current share price.

Key Expectation #1: Increase in Net Interest Income to Drive the Top Line

The Fed’s ongoing rate hike process has helped interest margins across the banking sector improve over recent years, and we expect this trend to continue for Q2 2018. We expect JPMorgan’s net interest margin (NIM) figure to increase to 2.54% in Q2 2018 from 2.31% in Q2 2017. At the same time, weekly data compiled by the Fed points to modest growth in loans across categories for U.S. banks – something we believe should be reflected in an increase in interest-earning assets for the period. Taken together, this should help JPMorgan’s net interest income for the quarter increase by 12-13% compared to the figure a year ago.

Key Expectation #2: Securities Trading Revenues To Remain Level Compared To Q2 2017

The first quarter of 2018 was an exceptionally strong period for investment banks globally thanks to a increase in volatility (especially in the equity market). This boosted securities trading revenues considerably for a period that sees seasonally elevated trading volumes. While the uncertainty introduced by a global trade war has kept the equity market in a state of flux over recent months, volatility has been well below the levels seen in March. This, taken together with the seasonally lower trading activity for the period, indicates that JPMorgan will most likely report trading revenues in Q2 2018 that are in line with the figure of $3.1 billion a year ago.

Key Expectation #3: Sizable Increase In Card Fees

There has been a notable jump in total card balances outstanding across the U.S. banking industry over recent months. While the first quarter is seasonally the slowest period for the card industry, JPMorgan reported card fees of $1.27 billion for the period. Taking into account the higher card balances, which would have increased total purchase volumes by cardholders for Q2, we expect JPMorgan’s card fees to cross $1.3 billion for the period. This represents a 11% jump compared to the figure of $1.17 billion in Q2 2017.

Don’t agree with our forecast? Feel free to input your own in our interactive model for JPMorgan

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