JPMorgan Chase (NYSE:JPM) released its Q2 financial results on Tuesday, setting a marker ahead of earnings week in the US.
The banking giant confirmed its profit during the second quarter more than doubled, while its revenue also beat expectations.
JP Morgan‘s net income increased to $11.95bn, up from $4.69bn compared to same period a year ago.
It is true that their results at this stage look strong in part thanks to being on the back of the economic crisis caused by the pandemic. However, Will Howlett, equity analyst at Quilter Cheviot, says the investment bank is in a fundamentally good position:
“The big US Investment banks including JPM hold top tier positions in seemingly almost everything, which gives them resilience in good times and in bad. JPM is a bellwether for other US banks, so today’s results should set the marker for similarly strong earnings from other large US banks throughout the week,” said Howlett.
Howlett also said loan growth is an area to focus on over the coming quarters, while average loans are flat year-on-year in the second quarter.
“Consumer credit demand is pretty poor at the moment, a reflection of the fact that consumers have built up their savings during the pandemic, helped by federal stimulus cheques, and have used these savings to pay down their credit cards and other borrowing. Likewise with interest rates so low, net interest income is at a low point in the cycle and this will be restricting bank profitability,” Howlett said.
From here, all eyes will be on the strength of the recovery in the States, and the knock-on impact on loan demand and consumer spending, “particularly with concerns that record levels of deal-making boosting the investment bank are unsustainable”, said Howlett.
“From a share price perspective, US banks tend to follow the yield on 10-year US Treasuries. As a consequence, US banks have been underperforming over recent months given the move in yields since the first quarter, but this is simply a relative weakness after a strong recovery from the lows of last year.”
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