Financials Overview: Week of June 19–23, 2017
US stocks ended the week with a marginal gain. Weak financials and consumer staples shares eclipsed a rally in the healthcare and biotechnology sectors.
In June 2017, 16 of the 29 analysts covering JPMorgan Chase (JPM) rated the stock as a “buy” or “strong buy” as compared to 17 analysts in March 2017 and 15 analysts in April 2017.
In 2Q17, JPM is expected to rise 3.9% on a year-over-year basis, reflecting lower growth due to a marginal rise in broad markets (SPX-INDEX) (SPY), lower trading activity, and lower credit offtake.
JPMorgan Chase’s (JPM) commercial banking is expected to see improved margins in 2Q17 on higher rates, deposit growth, and marginally higher loan offtake.
In recent quarters, JPMorgan Chase (JPM) has returned 70%–75% of its net profits to shareholders in the form of dividends and repurchases.
JPMorgan Chase’s (JPM) Consumer and Community Banking division manages revenues from consumer and business banking, its credit card business, and mortgage banking.
JPMorgan Chase’s (JPM) asset management business has seen strong growth over the past few quarters on the back of rising valuations of equity and debt holdings.
JPMorgan Chase (JPM) has garnered strong growth in recent quarters on corporate advisory, equity and debt underwriting, and higher trading activity across asset classes.
JPMorgan Chase (JPM) is expected to post earnings per share (or EPS) of $1.61 in 2Q17 and $6.66 for the full year.
On June 12, 2017, the White House issued recommendations to relax banking regulations due to a significant improvement in the financial system and renewed economic growth.
Bank of America (BAC) has improved its efficiency by putting in place a strong policy for expense reduction. In 1Q17, the bank achieved a 7% operating leverage.
Bank of America (BAC) is expected to post earnings per share (or EPS) of $0.46 in 2Q17 and $0.47 in 3Q17, compared to $0.41 in the previous year’s quarters.
President Donald Trump’s administration has presented the Financial CHOICE Act in hopes of repealing part of the Dodd-Frank Act.
As the Trump administration aims to roll out regulatory easing in the banking sector, analysts are expected to revise their ratings for the commercial banking space.
JPMorgan Chase (JPM) continues to be first in the world rankings based on its investment banking fees, reflecting its expertise in the execution of large-scale global transactions.
Commercial Banks (XLF) have seen subdued rises in their dividends following the 2007 recession, mainly due to failures in one or more stress tests.
JPMorgan Chase (JPM) manages $1.8 trillion in assets under management (or AUM), compared to Bank of America’s (BAC) $947 billion as of March 31, 2017.
JPMorgan Chase’s (JPM) commercial banking business has seen a reversal of its credit losses due to higher oil prices (USO) and growth in broad markets.
Commercial banks (XLF) have expanded their businesses in Europe and Asia to take advantage of global growth.
Commercial Banks are expected to see subdued trading activity in 2Q17 due to high valuations in broad markets, low growth expectations across major sectors, and weakening oil prices.