Why JPMorgan Shares Fell After Q2 Results

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JPMorgan Chase & Co. (NYSE: JPM) reported second-quarter 2019 results before markets opened Tuesday. The investment bank and financial services giant reported diluted earnings per share (EPS) of $2.82 on managed (adjusted) revenue of $29.57 billion. In the same period a year ago, the big bank reported EPS of $2.29 on managed revenue of $28.39 billion. Second-quarter results also compare to the consensus estimates for EPS of $2.50 on revenue of $28.91 billion.

The robust results were tempered by a change in the company’s full fiscal-year outlook. In a presentation accompanying its press release, JPMorgan said it expects net interest income for the fiscal year to come in at around $57.5 billion, a drop of $500 million from its prior estimate. The bank also said it expects adjusted expenses for the year to total less than $66 billion and net charge-offs to come in at around $5.5 billion.

Quarterly profits rose by 16% from $8.32 billion in the second quarter of 2018 to $9.65 billion. Net interest income totaled $14.5 billion, up 7%, driven by the impact of higher rates along with balance sheet growth and mix. The bank’s income tax benefit jumped to $768 million, up from an expense of $104 million in the prior quarter.

Noninterest revenue reached $15 billion, up 2% year over year. The bank attributed the year-over-year increase to “several notable items,” excluding which revenue would have been flat.

Provision for credit losses totaled $1.15 billion, a decrease of 5% year over year.

By divisions, net income in the consumer and community banking group rose by 22% to $4.17 billion, commercial banking net income fell by 8% to $996 million and asset management group net income fell 5% to $719 million for the quarter.

Corporate and investment banking group net income fell 8% to $2.94 billion and revenues were down 6% to $9.64 billion. Markets revenue of $5.4 billion was flat, including a one-time gain, without which revenue would have been down 6%.

Provision for credit losses in the group fell to zero, compared to $58 million in the prior-year quarter.

Bank CEO Jamie Dimon said:

We continue to see positive momentum with the U.S. consumer – healthy confidence levels, solid job creation and rising wages – which are reflected in our Consumer & Community Banking results.

The bank did not offer revenue or earnings guidance in its press release, but the consensus estimates call for third-quarter EPS of $2.50 on revenues of $28.63 billion. The EPS estimate for the 2019 fiscal year is $9.97 on revenues of $114.74 billion.

Shares traded down by about 1.7% in Tuesday’s premarket to $111.95. The 52-week trading range is $91.11 to $119.24, and the consensus 12-month price target was $118.80 before results were announced.

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