We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Rates, FRC Deal, Loan Demand to Aid JPMorgan (JPM) Q2 Earnings
Read MoreHide Full Article
The current high interest rate environment and the acquisition of First Republic Bank are likely to have boosted JPMorgan’s (JPM - Free Report) net interest income (NII). This, in turn, is expected to have supported its second-quarter 2023 earnings, slated to be announced on Jul 14 before the opening bell.
The Federal Reserve increased rates by 25 basis points in May and kept the rates unchanged at 5-5.25% during the June FOMC meeting. This, along with the FRC buyout, is likely to have had a favorable impact on JPM’s net interest margin (NIM) and NII. Nonetheless, the inverted yield curve and rising funding costs, as rates remained high, are expected to have weighed on NIM to some extent.
Lending activities continued at a slower pace in the to-be-reported quarter on higher rates and a challenging macroeconomic backdrop. Per the Fed’s latest data, the demand for commercial and industrial loans was soft in April and May, while real estate loans and consumer loans (specifically credit cards) witnessed decent demand.
The Zacks Consensus Estimate for JPMorgan’s average earning assets is pegged at $3.23 trillion, indicating a 4.4% fall on a year-over-year basis. Our estimate for the metric stands at $3.1 trillion, implying an 8.3% decline.
The Zacks Consensus Estimate for NII (reported) of $20.38 billion suggests a 34.7% surge. Our estimate for NII implies a jump of 42.4% to $21.54 billion.
Q2 Earnings & Revenue Growth Expectations
The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.66, which has moved almost 1% upward over the past seven days. Our estimate for earnings is $3.50.
The consensus estimate for sales of $37.03 billion indicates 20.6% growth. Our estimate for sales is $36.63 billion, reflecting a rise of 19.3%.
Click here to know about the other factors that are likely to have influenced JPM’s overall performance.
Our View
Modest loan demand, high interest rates and the buyout of FRC might have supported this Zacks Rank #2 (Buy) stock’s second-quarter performance. Yet, muted investment banking and markets businesses, subdued mortgage banking and higher reserve build to counter expected economic downturn are major headwinds.
Similar to JPM, other major banks like Bank of America (BAC - Free Report) and Citigroup (C - Free Report) are expected to have witnessed a decent NII performance in the second quarter.
Bank of America, which is the most interest rate-sensitive bank among its peers, is likely to have benefited from higher rates and modest loan demand. However, an inverted yield curve and higher funding costs are expected to have weighed on NII. The Zacks Consensus Estimate for BAC’s NII (FTE) of $14.29 billion suggests a 14% increase. Our estimate for NII (FTE) implies a rise of 14.4% to $14.35 billion.
Similarly, Citigroup will benefit from the above-mentioned factors, while inversion of the yield curve and rising funding costs are likely to have limited NII growth to some extent. The consensus estimate for C’s NII of $12.85 billion suggests a 7.4% year-over-year rise. We project NII of $11.9 billion for the quarter.
Both BAC is slated to announce quarterly numbers on Jul 18, while C will come out with the results on Jul 14.
Image: Bigstock
Rates, FRC Deal, Loan Demand to Aid JPMorgan (JPM) Q2 Earnings
The current high interest rate environment and the acquisition of First Republic Bank are likely to have boosted JPMorgan’s (JPM - Free Report) net interest income (NII). This, in turn, is expected to have supported its second-quarter 2023 earnings, slated to be announced on Jul 14 before the opening bell.
The Federal Reserve increased rates by 25 basis points in May and kept the rates unchanged at 5-5.25% during the June FOMC meeting. This, along with the FRC buyout, is likely to have had a favorable impact on JPM’s net interest margin (NIM) and NII. Nonetheless, the inverted yield curve and rising funding costs, as rates remained high, are expected to have weighed on NIM to some extent.
Lending activities continued at a slower pace in the to-be-reported quarter on higher rates and a challenging macroeconomic backdrop. Per the Fed’s latest data, the demand for commercial and industrial loans was soft in April and May, while real estate loans and consumer loans (specifically credit cards) witnessed decent demand.
The Zacks Consensus Estimate for JPMorgan’s average earning assets is pegged at $3.23 trillion, indicating a 4.4% fall on a year-over-year basis. Our estimate for the metric stands at $3.1 trillion, implying an 8.3% decline.
The Zacks Consensus Estimate for NII (reported) of $20.38 billion suggests a 34.7% surge. Our estimate for NII implies a jump of 42.4% to $21.54 billion.
Q2 Earnings & Revenue Growth Expectations
The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.66, which has moved almost 1% upward over the past seven days. Our estimate for earnings is $3.50.
The consensus estimate for sales of $37.03 billion indicates 20.6% growth. Our estimate for sales is $36.63 billion, reflecting a rise of 19.3%.
JPMorgan Chase & Co. Price and EPS Surprise
JPMorgan Chase & Co. price-eps-surprise | JPMorgan Chase & Co. Quote
Click here to know about the other factors that are likely to have influenced JPM’s overall performance.
Our View
Modest loan demand, high interest rates and the buyout of FRC might have supported this Zacks Rank #2 (Buy) stock’s second-quarter performance. Yet, muted investment banking and markets businesses, subdued mortgage banking and higher reserve build to counter expected economic downturn are major headwinds.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Similar to JPM, other major banks like Bank of America (BAC - Free Report) and Citigroup (C - Free Report) are expected to have witnessed a decent NII performance in the second quarter.
Bank of America, which is the most interest rate-sensitive bank among its peers, is likely to have benefited from higher rates and modest loan demand. However, an inverted yield curve and higher funding costs are expected to have weighed on NII. The Zacks Consensus Estimate for BAC’s NII (FTE) of $14.29 billion suggests a 14% increase. Our estimate for NII (FTE) implies a rise of 14.4% to $14.35 billion.
Similarly, Citigroup will benefit from the above-mentioned factors, while inversion of the yield curve and rising funding costs are likely to have limited NII growth to some extent. The consensus estimate for C’s NII of $12.85 billion suggests a 7.4% year-over-year rise. We project NII of $11.9 billion for the quarter.
Both BAC is slated to announce quarterly numbers on Jul 18, while C will come out with the results on Jul 14.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.