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JPMorgan (JPM) Expects Y/Y Decline in Q1 Trading Revenues
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At the UBS Financial Services Conference, JPMorgan’s (JPM - Free Report) CFO Jeremy Barnum said that while the bank’s trading revenues are anticipated to increase sequentially in the first quarter of 2024, driven by normal seasonality, revenues in the markets division will likely decline 5-10% on a year-over-year basis.
Barnum stated, “Both equities and macro were relatively strong last year in different kind of pockets. And so the slightly worse performance relative to the prior year is not particularly differentiated across asset classes.”
In first-quarter 2023, JPM’s markets revenues totaled $8.4 billion. Fixed-income markets revenues were stable year over year at $5.7 billion, whereas equity trading numbers were disappointing at $2.68 billion (down 12%).
In the last reported quarter, the bank’s markets revenues grew 2% year over year to $5.8 billion. Fixed-income markets revenues were $4.03 billion, whereas equity trading revenues were $1.78 billion.
At the conference, Barnum also shed some light on the expected performance of JPM’s investment banking (“IB”) business.
He said that first-quarter 2024 IB fees are expected to rise by a percentage in the low-to-mid teens on a year-over-year basis.
While there has been a resurgence in M&A activities so far this year, a complete revival in deal-making is not certain.
Barnum noted, “If we do a little bit of the dynamics product by product, M&A, we have seen some encouraging signs recently. But in the big picture, there is still some challenges there, remains a challenging regulatory environment. There is obviously still quite a bit of political and geopolitical uncertainty out there. So those are not the most conducive things for M&A.”
Then, in terms of the initial public offering (“IPO”) market, Barnum feels that the “IPO environment is a little bit weaker than you might have otherwise expected just because the performance in IPOs has been a little bit more mixed, I think a little bit disappointing to some people.”
Because of the above-mentioned concerns, Goldman Sachs’ (GS - Free Report) CEO, David Solomon, is also not that optimistic about the performance of the company’s IB business. While Soloman said that “it's gotten better” compared with “super anemic” activity during parts of 2022 and 2023, he does not expect IB to climb back to historical averages over the last decade.
For the past two years, big banks have been waiting for a pick-up in M&A activities. However, because of concerns relating to the increase in interest rates, along with other geopolitical woes, last year turned out to be one of the worst years for deal-making.
Thus, investors are hoping for 2024 to be the year for a revival in IB activities. This is also because banks’ traditional lending income is expected to decline this year. Given that the Federal Reserve will start cutting rates anytime this year, banks will see a fall in their interest income and margins.
Of banks that are expected to benefit from a deal-making revival, Goldman Sachs stands to gain the most. Last year, GS’ profits declined 24% due to the slowdown in deal-making and expenses associated with its high-profile exit from consumer lending.
Over the past six months, JPM shares have gained 23.2% compared with the industry’s 20.9% growth.
Another top-ranked stock from the same space is State Street Corporation (STT - Free Report) . The company carries a Zacks Rank of 2 at present. Over the past 60 days, the Zacks Consensus Estimate for STT’s 2024 earnings has been revised 4.5% upward. Over the past six months, STT shares have gained 7.2%.
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JPMorgan (JPM) Expects Y/Y Decline in Q1 Trading Revenues
At the UBS Financial Services Conference, JPMorgan’s (JPM - Free Report) CFO Jeremy Barnum said that while the bank’s trading revenues are anticipated to increase sequentially in the first quarter of 2024, driven by normal seasonality, revenues in the markets division will likely decline 5-10% on a year-over-year basis.
Barnum stated, “Both equities and macro were relatively strong last year in different kind of pockets. And so the slightly worse performance relative to the prior year is not particularly differentiated across asset classes.”
In first-quarter 2023, JPM’s markets revenues totaled $8.4 billion. Fixed-income markets revenues were stable year over year at $5.7 billion, whereas equity trading numbers were disappointing at $2.68 billion (down 12%).
In the last reported quarter, the bank’s markets revenues grew 2% year over year to $5.8 billion. Fixed-income markets revenues were $4.03 billion, whereas equity trading revenues were $1.78 billion.
At the conference, Barnum also shed some light on the expected performance of JPM’s investment banking (“IB”) business.
He said that first-quarter 2024 IB fees are expected to rise by a percentage in the low-to-mid teens on a year-over-year basis.
While there has been a resurgence in M&A activities so far this year, a complete revival in deal-making is not certain.
Barnum noted, “If we do a little bit of the dynamics product by product, M&A, we have seen some encouraging signs recently. But in the big picture, there is still some challenges there, remains a challenging regulatory environment. There is obviously still quite a bit of political and geopolitical uncertainty out there. So those are not the most conducive things for M&A.”
Then, in terms of the initial public offering (“IPO”) market, Barnum feels that the “IPO environment is a little bit weaker than you might have otherwise expected just because the performance in IPOs has been a little bit more mixed, I think a little bit disappointing to some people.”
Because of the above-mentioned concerns, Goldman Sachs’ (GS - Free Report) CEO, David Solomon, is also not that optimistic about the performance of the company’s IB business. While Soloman said that “it's gotten better” compared with “super anemic” activity during parts of 2022 and 2023, he does not expect IB to climb back to historical averages over the last decade.
For the past two years, big banks have been waiting for a pick-up in M&A activities. However, because of concerns relating to the increase in interest rates, along with other geopolitical woes, last year turned out to be one of the worst years for deal-making.
Thus, investors are hoping for 2024 to be the year for a revival in IB activities. This is also because banks’ traditional lending income is expected to decline this year. Given that the Federal Reserve will start cutting rates anytime this year, banks will see a fall in their interest income and margins.
Of banks that are expected to benefit from a deal-making revival, Goldman Sachs stands to gain the most. Last year, GS’ profits declined 24% due to the slowdown in deal-making and expenses associated with its high-profile exit from consumer lending.
Over the past six months, JPM shares have gained 23.2% compared with the industry’s 20.9% growth.
Image Source: Zacks Investment Research
Currently, JPMorgan carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Another top-ranked stock from the same space is State Street Corporation (STT - Free Report) . The company carries a Zacks Rank of 2 at present. Over the past 60 days, the Zacks Consensus Estimate for STT’s 2024 earnings has been revised 4.5% upward. Over the past six months, STT shares have gained 7.2%.