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How JPMorgan Chase Could Tackle Trade Wars

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Commercial and investment banking

JPMorgan Chase (JPM) has outperformed its peers in commercial and investment banking businesses in the past few quarters. The bank has maintained a lead in credit offtake and a higher share of wallet fees in investment banking. JPMorgan Chase is expected to see a sequential decline in the second quarter due to weaker trading revenues. Analysts expect an EPS of $2.22 in the second quarter backed by 6.6% revenue growth to $27.5 billion. Rate spreads, investment banking fees, credit offtake, and new assets are expected to drive the growth. The growth is expected to be partially offset by subdued trading income.

In the first quarter, JPMorgan Chase posted an EPS of $2.37. The company beat the estimates of $2.28 due to lower taxes, higher investment banking and trading revenues, core banking growth, and higher rate spreads. The growth was partially offset by the Asset Management segment’s lower revenues.

Other major banking peers (XLF) including Bank of America (BAC) and Citigroup (C) have managed reasonable credit growth. Wells Fargo (WFC) is struggling due to the expansion of its book.

Trade wars can result in higher volatility. However, the rate is lower than the rate in the first quarter. If the Fed decides to move slower on rate hikes due to the trade wars, we could see better credit offtake prospects for bankers.

Lending rate

JPMorgan Chase’s lending improved in the first quarter, core loans expanded 8%, and deposits grew 6%. The bank’s credit card sales increased 12%, while processing increased 15%. The growth reflects consumer confidence, lower unemployment, and corporate expansion.

The lending rate could become marginally subdued in upcoming quarters due to volatile macros and higher rates partially aided the by the push towards domestic manufacturing.

In this series, we’ll discuss recent macro changes and how they impact JPMorgan Chase. We’ll also discuss segments’ expected performances and valuations for long-term investments.

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