It’s time for big bank earnings again and one thing that will be interesting to observe is how high the bar has been set, and I don’t just mean in terms of consensus estimates.
Last quarter, the big boys reported solid results nearly across-the-board, only to discover that investors seemingly wanted more or else were determined not to bid the banks higher regardless of how good the numbers were.
The flattening yield curve has weighed on sentiment and at one point late last month, the S&P financials index had fallen for 13 consecutive sessions. Q2 was the worst quarter for the gauge since Q1 2016.
Once JPMorgan, Citi, Goldman, and Morgan results were in the books in Q1, it was clear that when it comes to volatility, they’d all be fine with “more cowbell”. Equities trading was a boon for pretty much everyone last quarter and unsurprisingly, given its dominance in the space, Morgan was the standout.
That’s the setup for Q2, and JPMorgan was first up to bat. Once again, trading revenue was impressive, rising 13% to $5.4 billion, with equities contributing $2.0 billion (representing 24% YoY growth):
Fixed Income Markets revenue was up 12%. Fixed Income Markets revenue of $3.5 billion reflected healthy performance across products with good client flows, and improved Commodities revenue compared to a challenging prior year. Equity Markets revenue was $2.0 billion, up 24%, driven by strength across products, predominantly in derivatives and Prime.
Future President of the United States and current man who is 364 times richer than the median person who works for him and an undisclosed number of times richer than Mike Mayo, described capital markets as “open and active”.
I don’t know who gets the credit for the “open” part, but when it comes to the “action”, you can at least partially thank Trump for keeping folks on their toes with the incessant trade banter.
Incidentally, if Dimon’s annual letter was any indication, he’s got some ideas about how to solve this country’s problems. And when it comes to running America “like a business”, JPMorgan seems to be doing a lot better than any of Trump’s various ventures.
In the Q2 media packets, Dimon reminds you he’s got himself a “strong, diversified franchise, and that “strong diversified franchise” just reported loan growth that surprised to the upside, beating even the loftiest analyst estimate.
“We see good global economic growth, particularly in the U.S., where consumer and business sentiment is high”, Dimon said, reinforcing the notion that the U.S. economy is still riding something of a sugar high from the lunatic plunge into late-cycle fiscal stimulus. “The healthy U.S. consumer drove double digit growth in client investment assets, card sales and merchant processing volumes”, he added.
The question now is whether JPMorgan’s results can be duplicated by peers and, more importantly, whether the market will care. Because as noted here at the outset, things have been a bit challenging lately.
J. Dimon for 2020. Anything’s better than what we have now….