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Why Analysts Have Low Growth Expectations for JPM in Q1

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Analysts’ expectations

JPMorgan Chase (JPM) is expected to announce its first-quarter results before the markets open on Friday, April 12. Analysts expect JPMorgan’s top line to stay flat at $28.5 billion as benefits from growth in loans and deposits are expected to be offset by the decline in trading revenues from the fixed income market.

Investors will be closely watching the bank’s performance on the profitability front. Notably, JPMorgan Chase missed analysts’ EPS expectation in the last quarter, thus breaking its long streak of beating analysts’ estimates. We believe banks could find it hard to grow earnings, especially in the absence of any rate hike. Moreover, increased competition could further pose challenges.

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Analysts expect JPMorgan to post earnings of $2.35 per share in the first quarter, which implies a YoY growth rate of about 4%. In the previous year, the bottom line of the major banks benefitted from the lower effective tax rate, growth in net interest income, and share repurchases. However, the growth rate is expected to be low in 2019 due to tough YoY comparisons and a challenging environment.

YTD stock performance

JPMorgan Chase is up 8.2% on a YTD basis as of April 8. However, the stock lagged the S&P 500 Index, which has grown by 15.5% so far this year. Concerns over a flat or declining interest rate, heightened competitive activity, and challenges in trading revenues limited the upside.

In comparison, Wells Fargo (WFC), Morgan Stanley (MS), Bank of America (BAC), Goldman Sachs (GS), and Citigroup (C) are up 6.1%, 13.4%, 18.4%, 21.2%, and 26.9%, respectively.

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