JPMorgan (JPM) reported a robust second quarter, with earnings surpassing analyst expectations, but its stock declined, falling over 2% at the open.
The financial giant announced an EPS of $4.40, which was $0.26 higher than the consensus estimate of $4.14.
The firm's net income stood at $18.1 billion, marking a significant 25% increase, bolstered by a $7.9 billion net gain related to Visa (NYSE:V) shares and a $1.0 billion donation of Visa shares to pre-fund contributions to the Firm’s Foundation. Net revenue also experienced a notable rise, up 20% to reach $51.0 billion. Excluding the Visa-related gain, noninterest revenue was up 14%, driven by higher investment banking fees, asset management fees, and CIB Markets noninterest revenue.
Chairman and CEO Jamie Dimon commented on the quarter's performance, highlighting the company's net income of $13.1 billion and a return on tangible common equity (ROTCE) of 20%, after accounting for the Visa shares gain and other discretionary items. Dimon also pointed out the significant growth in the company's CIB segment, with investment banking fees increasing by 50% and market share improving to 9.5% year-to-date (YTD). Moreover, the Card Services net charge-off rate was reported at 3.50%.
The provision for credit losses was $3.1 billion, which included net charge-offs of $2.2 billion and a net reserve build of $821 million. The net charge-offs were up $820 million, primarily due to Card Services. The net reserve build consisted of $609 million in Consumer, mainly in Card Services, and $189 million in Wholesale.
Dimon also emphasized the company's vigilance regarding potential economic risks, including geopolitical tensions and inflationary pressures. He noted the firm's strong capital position, with a CET1 ratio of 15.3%, and mentioned the Board's intention to increase the common dividend for the second time this year, reflecting a 19% cumulative increase compared to the fourth quarter of 2023.
JPMorgan's performance in the second quarter demonstrates its ability to navigate a complex economic environment while continuing to invest in long-term growth and maintaining a robust balance sheet. The company's prudent management and strategic investments have positioned it well for future challenges and opportunities.
Reacting to the report, analysts at RBC Capital said in a note: "Overall, relative to the uncertainty going into the quarter JPM reported strong core second quarter results, driven by better-than-expected fee revenues, partially offset by a higher provision and higher expenses.”
Analysts at Evercore ISI told investors that it is "hard to call a 20% ROTCE & a bigger than expected buyback anything but a good quarter, but our gut is with growth driven by strong results in capital markets, asset & wealth management and Cards, but flattish trends in loans & deposits and no change to guidance
in NII (or expenses), we could see a little pressure on the stock in light of its recent good run," they added.
Furthermore, analysts said that while there are some issues in the quarter to go through, they see a "ton of capital at a 15.3% CET1, lots of cash/NII optionality, a tame credit outlook and continued investment in organic growth across the company."