JPMorgan Earnings: What Happened with JPM

Key points to remember

  • EPS was $3.79 versus analysts’ expectation of $2.59.
  • Revenue exceeded analysts’ expectations.
  • Bond trading revenue was above the level estimated by analysts.
  • Equity trading revenue was above the level estimated by analysts.

What happened

JPMorgan reported its financial results for the fourth quarter of fiscal 2020, showing a strong EPS increase that far exceeded expectations. Revenue also exceeded expectations and marked a return to growth after the slight decline in the previous quarter. Bond trading revenue and equity trading revenue beat analysts’ forecasts.

(Below is the original Earnings Snapshot from Investopedia, published January 13, 2021.)

What to look for

JPMorgan Chase & Co. (JPM), the largest bank in the United States, is already considering a post-pandemic economy. The bank recently agreed to acquire a major travel and loyalty company, betting that people around the world will be eager to go on vacation and travel again.But the bank’s decision comes as signs are emerging that the pandemic and its effects are far from over: coronavirus cases are at record highs and job losses in the United States are mounting.

Investors will be watching closely how JPMorgan has weathered the economic fallout from the COVID-19 pandemic when it reports results on January 15, 2021 for the fourth quarter of fiscal 2020. Analysts expect earnings per share (PES) to barely increase as revenue edged down from the prior year quarter.

Investors will also focus on the bank’s trading revenue, coming from both its bond trading desk and its equity trading desk. Volatility remains elevated amid the ongoing pandemic, which is creating opportunities for traders. Analysts expect robust growth in JPMorgan’s bond trading revenue as well as its equity trading revenue.

JPMorgan shares have lagged the broader market for much of the past year. The stock started 2020 in step with the market, but lagged as stocks rebounded in late March from the pandemic-induced crash that began in late February. It wasn’t until early November that JPMorgan started closing the gap with the rest of the market. The bank’s shares have provided a total return of 6.0% over the past 12 months, below the S&P 500 total return of 15.6%.


Source: Trading View.

Shares of JPMorgan have been relatively insensitive to its quarterly results in recent quarters. The bank posted a 9.0% rise in EPS in the third quarter of fiscal 2020, marking the first growth since the fourth quarter of fiscal 2019. Revenue, however, fell 0.5%, the second decline in three quarters. The bank noted that its net interest incomethe difference between the interest it receives on loans and that it pays out on deposits decreased by 9%, mainly due to the fall in interest rates throughout the economy.

Financial results for the second quarter of fiscal 2020 were also mixed. EPS fell 50.9% from the same three months a year ago, while revenue increased 14.7%. But this is a marked improvement from the first quarter of fiscal 2020, when EPS fell 70.4% and revenue 3.2%, as the global economy suffered the first shocks of the COVID-19 pandemic.

Analysts expect EPS and revenue growth to be essentially flat in the fourth quarter of fiscal 2020, with EPS expected to increase only 0.7% as revenue declines 0.3% from the fiscal quarter. ‘last year. For full year 2020 results, analysts expect EPS to fall 28.3% as revenue grows 2.0%. It would be the first decline in EPS and the slowest revenue growth in at least four years.

JPMorgan Key Metrics
Estimate for the fourth quarter of 2020 (fiscal year) Q4 2019 (fiscal year) Q4 2018 (fiscal year)
Earnings per share ($) 2.59 2.57 1.98
Revenue ($B) 28.2 28.3 26.1
Bond Trading Revenue ($B) 3.9 3.4 1.9
Equity Trading Revenue ($B) 1.8 1.5 1.3

Source: visible alpha

As mentioned above, investors will also be watching JPMorgan’s bond and stock trading earnings. The bank refers to these income streams as fixed income market income and stock market income, respectively. With net interest income declining due to ultra-low interest rates, JPMorgan has had to rely more on its trading desks to generate revenue.

JPMorgan’s bond trading revenue increased 29.2%, 98.9% and 34.0%, respectively, in the third, second and first quarters of fiscal 2020. Excluding the last two quarters of 2019, these growth rates are significantly higher than in any other quarter since at least the fourth quarter of fiscal 2017.

The story is similar for the bank’s equity trading revenue, which grew 31.8%, 37.7% and 28.5%, respectively in Q3, Q2 and Q1, over the last exercise. Each of these growth rates is higher than in any quarter since at least the fourth quarter of 2017. Analysts estimate that bond trading revenue will increase 12.5% ​​and bond trading revenue will grow by 12.5%. Shares will rise 22.0% in the fourth quarter of fiscal 2020. While these numbers mark a slowdown, they are still stronger than the bank’s expected overall revenue growth.