What to Expect from J.P. Morgan amid Rising Rates

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What to Expect from J.P. Morgan amid Rising Rates PART 1 OF 8

What to Expect from J.P. Morgan amid Rising Rates

2017 performance

JPMorgan Chase (JPM) is expected to post earnings per share (or EPS) of $1.65 in 2Q17 and $6.70 for the full year. On a YoY basis, the bank’s 2017 performance implies growth of 8.2% mainly due to a higher base on a strong performance in 2016. The Fed is expected to raise rates two to three times in the current year, which could further boost net interest margins and income for commercial banks (XLF). However, banks could see subdued growth in trading activity, appreciation in wealth management, or fund management holdings. Overall, the space is looking to attract more capital and stable performance.

What to Expect from J.P. Morgan amid Rising Rates

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JPM beat estimates of $1.52 in 1Q17 and posted EPS of $1.65 backed by growth in trading and investment banking revenues partially offset by lower growth in consumer and community banking and asset and wealth management. Citigroup (C) and Wells Fargo (WFC) also beat EPS estimates by 12 and four cents, respectively.

Growth drivers

JPM is expected to see continued strong performance in its advisory business aided by higher liquidity and transaction activity in the market. Investment banking, loan growth, and its credit card division could be the main drivers of the bank’s business in the upcoming quarters. JPM managed to generate ROE (return on equity) of 11% in 1Q17.

In 1Q17, the bank’s consumer and community banking division saw 11% growth in its core loan book and deposits. Its credit card division saw a rise of 15% in sales volumes and an 11% rise in merchant processing volumes.

In its asset management business, JPM manages $1.8 trillion as of March 31, 2017, a growth of 10% YoY. The growth was boosted by inflows as well as the performance of the broader index (SPX-INDEX) (SPY).

In this series, we’ll look into JPM’s expected performance, growth outlook, asset management, banking, and valuations in 2017. Continue to the next part for a look at JPM’s net interest margins.


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