JPMorgan Markets

JPMorgan Beats, As Revenue Tops Highest Estimate, FICC Good Enough

Good enough?

After posting the first profit miss in 15 quarters during Q4, JPMorgan looks to have turned in an ostensibly better set of numbers for Q1.

Adjusted revenue for the first quarter rose 5% to a record $29.85 billion, topping even the highest analyst estimate and well ahead of consensus ($28.36 billion). Q1 EPS was $2.65. ROE in Q1 was the highest since 2007. NII hit a record $14.5 billion in Q1, helped along by Fed hikes.

You’ll recall that FICC was a disaster last quarter. Specifically, Q4 FICC sales and trading revenue dove 18%, coming in at just $1.86 billion, missing estimates by a country mile ($2.29 billion). That was the worst quarter for the unit since the crisis.

In Q1, the numbers look “better”, although that’s something of a relative term here. Total Markets revenue was down 10%, Fixed Income Markets revenue fell 8%, and Equity Markets revenue was down 13%. You’ll note that Q1 2018 was something of a “special” time for markets, as it captured Vol-pocalypse.

FICC sales and trading revenue was $3.73 billion in Q1, and that looks like it’s ahead of estimates, (which put the figure at $3.67 billion). But the bank cites “lower revenue in Currencies & Emerging Markets and Rates” thanks (or no thanks, I guess) to “lower client activity compared to the prior year.” On the bright side, Credit Trading and Commodities “improved”, according to JPM, on the back of “higher client flows”.

For context, recall that Q4’s rather disconcerting FICC numbers marked a second consecutive quarter of lackluster FICC results. Q3’s stumble was blamed on “mild weakness in Rates, Financing, Credit Trading and Securitized Products”, while Q4’s dastardly results were due to “challenging market conditions”. The problem with that is it seemed to suggest that FICC was having trouble in low vol. environments and during periods of tumult. It’s not clear whether Q1 suggests a real “turnaround”, per se, but today’s numbers will probably “work”.

Anyway, equities sales and trading revenue came in at $1.74 billion in Q1 – that’s basically in-line (consensus was $1.73 billion). The bank reminds you that the numbers in equities are comping against a “strong prior year” and Q1 2019’s results “reflect lower client activity, predominantly in derivatives.”

Investment banking revenue of $1.7 billion looks like it topped estimates ($1.63 billion). JPM cites “higher debt underwriting and advisory fees, partially offset by lower equity underwriting fees.”

The Q1 provision for credit losses was $1.50 billion. That’s up $330 million from last year and is attributable, apparently, to “select C&I” client downgrades. For anyone who cares, the $1.5 billion figure is bang in-line with estimates. The range was $1.36 billion to $1.64 billion. JPM also notes higher net charge-offs in cards, driven by loan growth.

In any case, this sucker’s a-runnin’ in the premarket, so, again, it looks like this is going to be good enough, although it goes without saying that knee-jerk moves on big bank earnings can (and often do) reverse quickly.

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