In April, JPMorgan reported Q1 results that showed the bank bouncing back from its first profit miss in 15 quarters with a decent set of results, which included record adjusted revenue that topped even the highest analyst estimate and record net interest income of $14.5 billion, a figure that was helped along by Fed hikes.
One would assume the first quarter was the high water mark in terms of Fed-assisted NII boosts. Last quarter, the bank reiterated that it expects $58 billion of interest income for the year. That would be a $3 billion increase from 2018.
Fast forward to Q2’s results, out Tuesday, and NII came in at $14.5 billion again, but (sure enough) the bank cut its annual net interest income outlook to $57.5 billion.
Revenue was $29.6 billion, up 4%. Adjusted EPS was $2.59, better than estimates of $2.50.
In Q1, trading revenue at the bank fell 17% to $5.5 billion, which was actually a bit better than expectations. This quarter, markets revenue of $5.4 billion was down 6% excluding a gain from the Tradeweb IPO.
FICC sales and trading rebounded last quarter from a disastrous Q4 (which was the worst quarter since the crisis for JPMorgan’s fixed-income unit), and Q2 looks ok – I guess. FICC revenue fell 3%, hit by weakness in EMEA, but helped out by what the bank describes as “increased client activity in North America Rates and agency mortgage trading”. In other words, helped out by rates volatility.
On May 28, Jamie Dimon warned that the bank’s trading revenue dropped 4%- 5% during the first two months of Q2 (from a year earlier). A day later, Citi and BofA delivered similarly cautious remarks. On Monday, Citi reported a 5% drop in trading in its rather bland Q2 results.
Equities sales and trading revenue was $1.7 billion in Q2 for JPM – that’s down 12%. The bank cites lower client activity in derivatives and a tough comp. It doesn’t help that the VIX closed above 20 just one time during Q2 and averaged just ~15.
“Markets performance was relatively steady on slightly lower client volume, probably due to slightly higher global macroeconomic and geopolitical uncertainties”, Dimon said.
Investment banking revenue was $1.8 billion, that’s down 9%.
The provision for credit losses firmwide was $1.1 billion, lower by 5%. In consumer banking, the provision of $1.1 billion was mostly flat. Dimon painted an upbeat picture of the US consumer and, by extension, the US economy. To wit:
We continue to see positive momentum with the U.S. consumer — healthy confidence levels, solid job creation and rising wages — which are reflected in our Consumer & Community Banking results. Double-digit growth in credit card sales and merchant processing volumes reflected healthy consumer spending and drove 8% growth in credit card loans, while mortgage and auto originations showed solid improvement, and we continued to attract new deposits, up 3%.
Ultimately, this looks ok, but nobody is going to be particularly amused with the NII forecast, which is presumably why the shares knee-jerked lower in the premarket after the results hit.
