JP Morgan beats expectations - good earnings from the financial sector?

14.10.2022 17:07|Conotoxia Ltd Analyst Team

The US financial sector announced results that seem to beat Wall Street analysts' expectations. Thus, the banks' shares seem to be continuing the rally started on Thursday by the statement of the CEO of one of them, Jamie Dimon.

Is the risk of financial problems factored into JPM's share price?

The financial sector has been plagued by several problems in recent times, affecting European banks in particular (Credit Suisse, UBS, Deutsche Bank and BNP Paribas). Some analysts link the problems of the big players to their exposure to the bond market, which this year, for the first time, lost more in long-term bonds than the equity index (S&P 500). 
 
Some of them had problems already with their business growth and financial problems for several years, such as Credit Suisse. The numerous fines that have been, for example, imposed on this Swiss bank should not be underestimated either. These problems, together with the increasing difficulty of navigating an institution in a year so full of market volatility, could threaten the stability of the financial system.

The risk of one institution's problems being transmitted to another seemed to be factored into the share prices of not only European but also US banks. This could have created plenty of room for a strong rebound following the release of data that disrupts such a pessimistic narrative.

Good performance from the financial sector?

On Thursday, banking sector stocks gained strongly after the JP Morgan Chase CEO's words about the significant reserves ($1.2 trillion) of cash of one of the leaders in the sector. Could the trend continue during today's session?
Quarterly results were announced by JP Morgan, Wells Fargo, Morgan Stanley, Citigroup and PNC Financial, among others. According to the consensus, all of them seem to beat revenue volume expectations and almost all (except Morgan Stanley) net profit expectations. 

Since the start of 2020, the shares of the aforementioned banks have lost 30.2 per cent, 15.1 per cent, 18.8%, 30.0% and 25.6%, respectively. In comparison, the SPY (S&P 500) has lost 23.4%.

JP Morgan Chase example

The bank of celebrity financier Jamie Dimon and the largest US bank by asset size, announced $33.49 billion in revenue for the third quarter, beating expectations of $32.1 billion. The company's expenses also came in lower than expected, which translated into a strong net profit.

JP Morgan Chase, daily chart

jpmorgan_notowania
Source: Conotoxia MT5

EPS (earnings per share) came in at $3.12 against expectations of $2.88, beating expectations by 8.3%. In addition, the bank generated $17.6 billion in net rate revenue. Thus, the bank recorded its highest quarterly level of this component ever and raised its year-end guidance. The CEO told investors that after halting share buybacks in July, they are looking to return to them early next year.

At 16:00 GMT+3, JP Morgan Chase is gaining around 1% before the market opens.

Competitors 

Revenue and EPS of peers (Wells Fargo, Morgan Stanley, Citigroup and PNC Financial) against analysts' consensus were, respectively: revenue: $19.5bn vs $18.79bn, EPS: $1.30 vs $1.09 (Wells Fargo), revenue: $12.99bn vs $13.3bn, EPS: $1.47 vs $1.49 (Morgan Stanley), revenue: $18.51bn vs $18.25bn, EPS: $1.63 vs n.a. (Citigroup), revenue: $5.55bn vs $5.41bn, EPS: $3.78 vs $3.69 (PNC Financial). 


Rafal Tworkowski, Junior Financial Markets Analyst, Conotoxia Ltd.  (Cinkciarz.pl investment service)


The above trading publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of 16 April 2014. It has been prepared for information purposes and should not form the basis for investment decisions. Neither the author of the study nor Conotoxia Ltd. accepts any responsibility for investment decisions made on the basis of the information contained in this publication. Reproduction or reproduction of this study without the written consent of Conotoxia Ltd. is prohibited.

 

 

 

 

 

 

 

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