Why Does JPMorgan Expect Weak Trading and Investment Revenues?



JPMorgan’s revenues expected to decline

In this article, we’ll compare JPMorgan Chase’s (JPM) revenue performance with analysts’ estimates. Analysts expect JPMorgan’s revenues to decline in 1Q16.

On April 13, 2016, JPMorgan (JPM) will be the first among the larger US banks to report its first-quarter 2016 earnings. Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS), and Bank of America (BAC) will report their earnings in the following weeks.

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Revenue estimates

In the past few quarters, JPMorgan has posted better-than-expected earnings and has topped revenue estimates. This quarter, Wall Street investors (SPY) expect JPMorgan’s revenues to decline due to the recent turmoil in the financial markets. For the quarter, analysts expect revenues of $23.9 billion. This is 4% lower than the $23.5 billion in revenues reported in 1Q15. They’re slightly higher than the $23.2 billion in revenues reported in 4Q15.

Generally, the first quarter is expected to be the strongest for banks’ trading divisions, as traders open new positions and set out their strategies for the rest of the year. However, 1Q16 hasn’t been favorable to client activity and trading. Financial markets have been extremely volatile during the quarter.

JPMorgan warned of weak trading and investment banking revenues

Last month, JPMorgan expressed concerns regarding low client activity and volatility in the financial markets that were hampering trading-related revenues. Plunging oil prices and fears of a recession have put more pressure on its top line. JPMorgan expects its sales and trading revenues to decline by 20% year-over-year during the first quarter. Trading revenues contribute 20% to JPMorgan’s non-interest income. The company’s investment-banking revenues are also expected to be affected due to low merger and acquisition activity.

Next, let’s look at why JPMorgan expects earnings to be lower year-over-year.


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