- J.P. Morgan reported a great set of results for the second quarter, beating market estimates in revenue growth, reflecting a jump of 34% to $42.4 billion, due to higher interest rates and solid loan growth. Additionally, the company raised its guidance for the current financial year, increasing net interest income to $87 billion, $3 billion above the previous guidance in May 2023, marking the third increase this year.
- J.P. Morgan Chase is the largest global bank with a diversified business model of financial services income streams, including retail banking, investment banking, fixed interest and equity trading, and asset management, which helps reduce operational risk during market volatility and uncertainty.
- The group outperformed its peers, achieving diluted EPS growth of 72% to $4.75 in the current quarter.
The strong results were driven by the retail bank, which saw a surge in profits of 71% to $5.3 billion, aided by better-than-expected trading and investment banking contributions, surpassing analysts’ estimates despite the regional banking crises in March. - The acquisition of the remnants of First Republic Bank boosted loans and securities by around $203 billion, with an increase of $92 billion in deposits, helping cushion some of the challenges faced by the financial services industry, such as low-interest-rate deposits being switched to moneyarket investments earning higher interest rates, resulting in an outflow of deposits from some regional banks.
- Jamie Dimon’s acquisition strategy resulted in a post-tax gain of $1.8 billion. However, he remains cautious about salient risks in the year ahead, such as core inflation remaining stubbornly high, interest rates staying higher for longer, a slowdown in consumer spending, and the war in Ukraine worsening.
- The bank raised provisions for credit losses from $1.1 billion to $1.7 billion, showcasing the quality and depth of the executive management team. Despite the conservative outlook, statements suggest that the US economy continues to be strong, and consumer balance sheets remain healthy, with resilient labor markets softening somewhat.
- J.P. Morgan is a high-quality share with a sound and consistent earnings growth record, offering an attractive PE of 9.9x and a historic dividend yield of 2.6%. As a long-term investor, I have been invested in the share for the past few years, similar to my Bank of America shares, where Warren Buffet is a significant shareholder.
By Ron Klipin