JPMorgan reported second-quarter earnings of $ 4.7 billion, down from $ 9.7 billion a year ago. However, earnings per share only fell to $ 1.38, easily exceeding Wall Street expectations. Revenue rose 15% to a record $ 33 billion, beating estimates.
Jamie Dimon, CEO of JPMorgan, made a cautious note about the road ahead.
“Despite some recent positive macroeconomic data and significant and decisive government action, we still face a great deal of uncertainty regarding the future path of the economy,” Dimon said in a statement. “However, we are prepared for all eventualities as our balance of strength allows us to remain a port in the storm.”
JPMorgan said loan loss provisions totaled $ 10.5 billion during the quarter, compared to just $ 1.2 billion the year before. Most of that was caused by the accumulation of reserves of $ 8.9 billion as the bank prepares for loans to fall in the coming months. This marks an acceleration from the first quarter, when JPMorgan reported credit costs of $ 8.3 billion, including reserve accumulations of $ 6.8 billion.
JPMorgan said the growing reserves accumulated during the second quarter “reflect further deterioration and greater uncertainty in the macroeconomic outlook as a result of the Covid-19 impact.”
JPMorgan’s shares, which have lost nearly a third of their value this year, held steady on Tuesday.
JPMorgan reported company-wide average loans of $ 998 billion, 4% more than the previous year. Deposits increased 25% to $ 1.9 trillion.
The consumer division suffers a loss
Analysts have warned that the banks’ results will be “really ugly” because the storm is hit by a perfect storm of trouble during the pandemic. Lenders are grappling with mass unemployment, rising bankruptcies, and the uncertain health crisis. Also, bank earnings are declining due to extremely low interest rates.
However, actual credit losses were minimal. JPMorgan reported $ 1.3 billion in net cancellations, unchanged from a year ago.
JPMorgan executives said this recession is abnormal due to the high level of government stimulus support, which has helped increase Americans’ personal incomes.
“May and June are really easy months in terms of what this recovery will be like,” Piepszak said in a call with reporters. The actual damage, he said, would become apparent in the coming months.
The market boom is the end result of JPMorgan
Although Main Street is struggling, Wall Street is enjoying a rapid recovery from the crisis. American companies raised a record $ 190 billion through stock sales during the second quarter, according to Dealogic. That surge in equity sales, highlighted by IPOs from software firm ZoomInfo and supermarket chain Albertsons, has led to a fee boom for investment banks.
Profits increased 85% at JPMorgan’s corporate and investment bank, which reported record revenue of $ 16.4 billion. Investment banking commissions soared 54% amid the business surge.
JPMorgan’s commercial business was another bright spot. Revenue from markets and stocks increased 77%, led by a 99% increase in the fixed income arm. JPMorgan cited widespread strength, especially in interest rates, currencies, credit and emerging markets.
However, the bank warned that market revenues will not remain as strong.
Dimon said the amount of capital raised by the companies “will definitely decrease” and that business revenue is likely to halve during the third quarter.
“We don’t assume that we have these incredible business results going forward,” said Dimon.
While the bank’s transition to working from home has been successful, with increased investment banking and business revenue, Dimon said he doesn’t imagine most staff staying away in the long term. About 20% of merchants are back at the company’s offices.
“I guess someday we will all go back to work and a percentage, say 10%, could be done at home,” Dimon said. “I think there are great benefits to people who are together for their creativity.”
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