ii view: JP Morgan Chase banks record quarterly profit

US banking giant JP Morgan has reported strong progress, but investors are looking forward.

Second-quarter results to the end of June 2019

• Revenue up 4% to $29.6 billion
• Net income up 16% to $9.7 billion
• Earnings per share up 23% to $2.82

Chief executive Jamie Dimon said:

"We had a strong second quarter and first half of 2019, benefitting from our diversified global business model. We continue to see positive momentum with the US consumer – healthy confidence levels, solid job creation and rising wages – which are reflected in our Consumer & Community Banking results. In the Corporate & Investment Bank, Markets performance was relatively steady on slightly lower client volume, probably due to slightly higher global macroeconomic and geopolitical uncertainties."

ii round-up:

JPMorgan Chase & Co (NYSE:JPM) is a major US bank working in over 100 markets. 

It employs over 250,000 staff across its four operating divisions of consumer and community banking, corporate and investment banking, commercial banking, and asset and wealth management.

It made a record profit in the second quarter, exceeding analyst forecasts, aided by an income tax resolution benefit of $768 million. 

Profits for its consumer and business banking division led the way, rising 22%, and pushed along by higher net interest income as a result of higher deposit margins and balance growth. Double-digit growth in credit card sales and merchant processing volumes reflected healthy consumer spending and drove 8% growth in credit card loans. 

Profits for its corporate and investment bank fell by 8%, hindered by lower fees and lower client activity. Assets under management for its investment business grew by 7% to $2.2 trillion. 

Less favourably, and in light of expected US interest rate cuts later this year, management has lowered its expectations for net interest income over the year.

ii view:

JP Morgan is a highly diverse US banking giant. Its operations cover both traditional consumer and corporate banking along with investment banking and asset management. With North America generating around three-quarters of its revenues, the bank is seen as offering a broader health check on the wider US economy. 

These second-quarter results saw its more traditional banking operations lead the way, potentially aided by previous US central bank interest rate hikes adding to the difference between deposit interest and loan interest rates i.e. net interest income. With expectations now for the US central bank to potentially lower rates going forward, JP Morgan management dropped its forecasts, too, overshadowing record second-quarter profit. For now, and despite mixed US economic indicators, US bank fortunes are likely to remain largely tied to interest rate expectations. 

Positives: 

• Record second-quarter profit
• Profits at consumer and business banking division up 22%
• The bank in late June passed the Federal Reserve's stress test

Negatives:

• Cut guidance for 2019 net interest income, a main driver of bank profits
• Profit fell 8% at its corporate and investment bank
• Possible US interest rate cut is negative for banks 

The average rating of stock market analysts:

Buy