Jamie Dimon, CEO of JPMorgan Chase & Co.
Marlene Awaad | Bloomberg | fake pictures
JPMorgan Chase managed to shake off the most quarterly revenue in its history at the same time that the US economy is in the midst of a sharp recession.
The bank posted $ 33.8 billion in second-quarter revenue, helping it make a higher-than-expected profit of $ 4.69 billion for the period, due to cunning steps by CEO Jamie Dimon to build its investment bank in the years after the financial crisis. .
JPMorgan is known for being one of the largest retail banks in the US, with a network of coast-to-coast branches that has fueled much of the lender’s dominance in the past decade. Thanks to the coronavirus pandemic, that division has left the company exposed to billions of dollars in possible loan defaults on credit cards, mortgages, and auto lines.
But JPMorgan also has the world’s largest Wall Street bank by revenue, a business that is helping it capture opportunities created by the pandemic response. Increasing volatility and unprecedented steps taken by the Federal Reserve to support credit markets have created the best environment to negotiate and advise on debt and equity issuance in years.
Now, Dimon’s moves to gain market share in trading and investment banking from weakened rivals like Deutsche Bank look especially smart. JPMorgan’s corporate and investment bank posted a record profit of $ 5.5 billion in the second quarter, which is more money than most entire banks generated before the coronavirus pandemic.
The Wall Street division helped offset losses in two of JPMorgan’s four main businesses, its consumer and commercial bank, as the company set aside $ 8.9 billion for expected defaults from its operations.
JPMorgan’s operators exceeded expectations that had already risen for the quarter after management said in late May that market revenue was headed for a 50% increase. That figure jumped 79% to a record $ 9.7 billion, fueled especially by strong fixed-income trading.
Bond operators posted revenue of $ 7.3 billion, a 120% increase from the previous year, crushing the estimate of $ 5.84 billion by nearly $ 1.5 billion. Stock traders posted revenue of $ 2.4 billion, beating the estimate of $ 2.07 billion.
Investment banking revenue rose 91% to $ 3.4 billion in record-breaking advisory fees, as large corporate clients turned to debt and equity markets at breakneck pace to build cash positions amid uncertainty of the pandemic.
“We have raised record amounts of capital for our clients, advised them on strategic opportunities, and helped them navigate markets, all while facing personal challenges caused by the pandemic,” Daniel Pinto, JPMorgan Co-President and Head of the Corporation and investment bank said Tuesday in a personal memorandum. “It is difficult to predict what the rest of 2020 will be like, but we hope to return to more normal activity levels.”
Meanwhile, JPMorgan’s retail banking division posted a loss of $ 176 million, compared to a gain of $ 4.2 billion a year ago, driven by the addition of reserves on credit cards and other products. It was a similar story at the company’s commercial bank, which posted a loss of $ 691 million, compared to a gain of $ 1 billion the year before.
The company’s asset management division was less affected by the pandemic, posting 8% decrease in earnings to $ 658 million as it accumulated reserves for credit losses.
As for the way forward, it is not entirely clear, JPMorgan executives acknowledged Tuesday. Federal stimulus programs have supported individuals and small businesses in the second quarter, hiding the true impact of the pandemic, Chief Financial Officer Jennifer Piepszak said in a conference call on Tuesday.
If a relatively benign scenario arises, JPMorgan will have too much capital saved and could resume the share buyback starting in the fourth quarter, Dimon told analysts. If a more severe recession occurs, caused by a second wave of infections in the fall, the bank could be forced to cut its dividends, he said.
“We really are coming to the moment of truth in the coming months,” Piepszak said.
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