JPMorgan Chase Revealed Its First-Quarter Results

JPMorgan Chase Revealed Its First-Quarter Results

almost 4 years ago2 mins

Mentioned in story

Investors were on tenterhooks as JPMorgan became the first investment bank to reveal its first-quarter results – and they seemed to like what they saw 👍

What does this mean?

While JPMorgan’s total revenue was slightly lower than investors had predicted, the bank did well where it mattered most. Its “net interest income” – the money it earns from loans, minus the interest it pays out – was higher than expected, even though the Federal Reserve cut US interest rates to a record low in March 🏦 That rate cut – and others around the world – encouraged investors to chop and change their portfolios, which earned JPMorgan’s trading business more in commissions and led to the segment’s highest-ever quarterly revenue. It didn’t come out completely unscathed, of course: with companies dithering on deals and fundraising, the bank made less from advising them than expected.

Source: Bloomberg
Source: Bloomberg

Why should I care?

JPMorgan’s stock rose after its announcement on Tuesday: the boost to its trading business might be temporary, but its dividend is intact – for now. Still, the bank and some of its rivals suspended their lucrative share buybacks last month, and according to Autonomous Research, that suspension meant large American banks went from paying out 135% of their expected 2020 earnings on average to just 45%.

Source: The Wall Street Journal
Source: The Wall Street Journal

JPMorgan cautioned investors that lower rates will ultimately limit its net interest income, which could lead to even lower dividend payments. There’s another source of pressure too: a recent change in accounting rules means JPMorgan now has to put money aside for potential loan losses up front, rather than during the period the loan’s repaid 💵 That cost JPMorgan a higher-than-expected $8 billion last quarter, and it was the reason its profit fell almost 70% from the same time last year. Still, investors didn’t pay much attention since the bank’s increased costs weren’t its fault.

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