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Why JPMorgan Chase's Trading Could Offset a Major Rise

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Why JPMorgan Chase's Trading Could Offset a Major Rise PART 1 OF 10

Why JPMorgan Chase’s Banking Could Be Offset by Lower Trading in 2H17

JPM’s trading decline to continue

JPMorgan Chase (JPM) has posted strong numbers in the recent quarters backed by higher net interest margins, credit offtake, credit card spending, and trading performance. But in 2H17, the bank’s trading performance is expected to decline on a YoY (year-over-year) basis as well as sequentially.

In 3Q17, JPM is expected to post EPS of $1.67, compared with $1.82 in 2Q17 and $1.58 in 3Q16. This YoY rise is mainly due to credit offtake, higher margins, credit card spending, and asset management business, partially offset by lower trading revenues.

Why JPMorgan Chase&#8217;s Banking Could Be Offset by Lower Trading in 2H17

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Commercial banking peers (XLF) Citigroup (C), Wells Fargo (WFC), and Goldman Sachs (GS) are also expected to see subdued earnings due to lower trading activity.

Recent performance

In 2Q17, JPM managed strong results in core banking, card sales, and asset management fees, but these were partially offset by a decline in trading revenues. The bank posted revenues of $25.5 billion and managed revenues of $26.4 billion. It witnessed strong growth in loans and deposits of 9% and 10%, respectively.

Although business was slower for JPM’s investment banking division, the bank maintained the lead among other investment bankers and rewarded shareholders with $4.5 billion in the form of dividends and repurchases.

JPM’s book value per share saw a growth of 5% to $66.05 in 2Q17, with a Basel-III Tier-1 Capital ratio of 12.5%, reflecting a growing and strong balance sheet for future expansion and risk-taking ability.

In this series, we’ll examine JPM’s expected performance across divisions in 2H17, assess how the sector is shaping up after the recent Fed rate hikes, and explore balance sheet strength, macros, global growth spillover, geopolitical concerns and policy-making, shareholder payouts, and valuations.

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