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Solid Trading Performance to Aid JPMorgan's (JPM) Q4 Earnings

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Similar to the first nine months of 2020, JPMorgan’s (JPM - Free Report) trading revenues (constituting roughly 20% of its total revenues) are expected to have witnessed significant improvement in the fourth quarter. Thus, higher trading revenues will likely support the bank’s overall results, scheduled to be announced on Jan 15, before market open.

The lingering concerns related to the impact of the pandemic along with other major developments like the U.S. Presidential elections and the vaccine breakthroughs led to a continued significant rise in market volatility in fourth-quarter 2020. Along with significant volatility, client activity remained strong. Thus, JPMorgan’s trading businesses (both equity and fixed income) are expected to have received a substantial boost in the to-be-reported quarter.

At an investor conference in early December 2020, management provided an outlook related to overall markets revenues. The bank expects a 20% year-over-year rise in markets revenues for fourth-quarter 2020.

Unlike the first half of the year, when almost all major indexes like the S&P 500, Dow Jones and Nasdaq witnessed a roller coaster ride, swinging from highs to record lows; the fourth quarter mainly witnessed an upswing in equity markets, with the indexes touching new highs. Along with impressive equity markets performance, fixed income trading remained strong, driven by the Federal Reserve’s bond-buying program. Hence, JPMorgan’s equity and fixed-income trading revenues are expected to have improved in the fourth quarter.

The Zacks Consensus Estimate for equity markets revenues of $1.62 billion suggests a rise of 7.4% from the prior-year reported number. The consensus estimate for fixed-income trading revenues of $3.80 billion indicates an increase of 10.2%.

Earnings & Revenue Expectations

For JPMorgan, the Zacks Consensus Estimate for fourth-quarter 2020 earnings is pegged at $2.69, which indicates a 4.7% rise from the prior-year quarter’s reported number. Also, the consensus estimate for sales of $29.28 billion suggests a rise of 3.4% year over year.

See what other factors are expected to have influenced JPMorgan’s overall performance in the to-be-reported quarter.

JPMorgan Chase & Co. Price and EPS Surprise


JPMorgan Chase & Co. Price and EPS Surprise

JPMorgan Chase & Co. price-eps-surprise | JPMorgan Chase & Co. Quote

Our Take

Continued near-zero interest rates along with muted loan growth are likely to have hurt this Zacks Rank #1 (Strong Buy) stock’s interest income to an extent in the to-be-reported quarter. However, impressive trading performance along with a rise in mortgage revenues (driven by historically low mortgage rates) are expected to have offered support to the top line.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Trading Revenue Expectations of Other Players

Trading revenues constitute a major portion of total revenues for Bank of America (BAC - Free Report) , Citigroup (C - Free Report) and Morgan Stanley (MS - Free Report) . Similar to JPMorgan, impressive trading performance is likely to have provided support to these banks’ revenues and earnings in the fourth quarter.

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