JPMorgan’s Dimon Says Investment Banking Will Hold up in Q4
In a presentation last week, JPMorgan (NYSE:JPM) CEO James Dimon set investor expectations straight by announcing that the investment banking revenues for Q4 will be more-or-less at the same level as witnessed in Q3 2011. [1] Dimon also added that the bank’s private-equity business will end up with a “modest loss” for this quarter. Though not completely unexpected, given the turmoil in global markets largely due to the ensuing drama in Europe, the announcement by Dimon is also seen as an indicator of the performance of other global investment banks, including Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS), this quarter.
We maintain a $39 price estimate for JPMorgan’s stock, and believe that the 22% premium can be attributed to the widespread pessimism among investors toward the stock market in general, and bank stocks in particular, in the wake of the deteriorating European debt crisis.
See our full analysis of JPMorgan
JPMorgan Reported One of its Worst Results Last Quarter
JPMorgan’s investment banking operations reported revenues of $6.4 billion in Q3 2011, notably lower than the $8.2 billion and $7.3 billion realized in Q1 and Q2, respectively. The majority of the decline can be attributed to the bank’s sales & trading operations, which was hit by extreme volatility in the financial markets during the period. With the European debt situation not showing much change over this quarter, the conditions are just as difficult as they were in the last quarter for trading operations.
Investors are understandably shying away from risky assets, and charge-offs to European sovereign debt holding continue to be a problem for investment banks, resulting in stagnant revenues for JPMorgan’s investment banking arm.
Submit a Post at Trefis Powered by Data and Interactive Charts | Understand What Drives a Stock at Trefis
Notes:- JPMorgan’s Investment Bank Revenue ‘Flat,’ Chief Dimon Says, Bloomberg, Dec 8 2011 [↩]