JPMorgan Chase & Co.’s market capitalisation of nearly $300 billion makes it the biggest bank in the US, and essentially, one of Wall Street’s flagships.
This is why its earnings report from yesterday was highly anticipated by investors, who wanted to see whether JPM has managed to weather the initial risk from the escalating coronavirus crisis, and what the broader ramifications for the entire financial industry in the states would be.
The bank reported dismal net income for the first fiscal quarter of 2020 equalling $2.86 billion, which marked an enormous drop from the $8.52 billion that was reported for Q4 2019. In comparison, the net income for Q1 of 2019 was reported at $9.17 billion.
JPMorgan Chase & Co. EPS. Image source: TradingEconomics.com
Consequently, JPMorgan Chase reported a considerable drop in its Earnings Per Share to $0.78 from the $2.65 that was reported for the same period last year. The delivered EPS data for Q1 2020 plummeted way below the consensus forecasts, which were projecting EPS of $2.49.
There is, however, a silver lining to JPM's poor earnings data, and that is the fact that the bank's net revenue remained relatively unscathed by the economic fallout at $29.06 billion. This marks a marginal drop from the $29.21 billion that was recorded for Q4 2019.
Arguably, the most important excerpt from the findings of the report is the confirmation of JPMorgan’s readiness to weather the still-evolving coronavirus crisis and to continue supporting the financial industry with its liquidity.
Jamie Dimon, Chairman and CEO, commented on the bank’s quarterly performance:
“The company entered this crisis in a position of strength, and we remain well capitalised and highly liquid. […] And JPMorgan Chase performed well in what was a very tough and unique operating environment - growing deposits in every line of business and providing loans as we extended credit and served as a port in the storm for our clients and customers. In the first quarter, the underlying results of the company were extremely good, however, given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter.”
The CEO’s commentary alludes to the bank’s efforts in hedging the risk of deepening recession by implementing the necessary measures to ensure enough liquidity for the foreseeable future in case that the situation continues to worsen in Q2.
JPM’s stock price fell by 2.74 per cent yesterday after the report was released, but the underlying market sentiment remains tilted to the north side due to the bank’s demonstrated resilience in the wake of this unprecedented economic crisis.
JPM 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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