JPMorgan Chase Quarterly Earnings Were Strong, But The Stock Price Was Slightly Down
JPMorgan Chase reported their earnings on Friday. The numbers beat the Street’s forecast, but the stock price didn’t respond accordingly and was actually slightly down for the day.
JPMorgan Chase's second-quarter earnings of $2.29 per share topped analysts' expectations of $2.22. This represents 26% earnings growth from the same quarter a year ago.
To be fair, some of the bank's earnings growth was due to the lower corporate tax rate that came with the Tax Cuts and Jobs Act, but the bank's revenue also grew by 6% to $28.4 billion. In other words, it didn't post impressive earnings just because of tax reform -- the business is generating more money as well.
JPMorgan Chase's yield on interest-earning assets (interest margin) of 2.46% represented a decline of two basis points from the first quarter. Generally, a rising-rate environment like the one we're in translates into higher margins, so this is definitely a trend to watch.
Do you think they would of beat the Street’s forecast without the Tax Cuts and Jobs Act? For the stock price not to really move higher, tells me these expectations were already priced in and thus, further supports my sell the banks’ thesis. Lastly, the only thing I can think of regarding a decline in JPMorgan Chase's interest margins in a rising rate environment is customers taking out savings to spend money, to go further in debt, but again I’m only speculating.
JP Morgan Chase seems to be the strongest of the banks thus far, so prey on the weaker banks to short.
Three macro headwinds that I think the Banks have to deal with:
*Trading volume transaction fees continue to decline relative to 1Q of 2018.
*Home origination fees are decreasing due to rising interest rates.
*The yield curve is squeeze bank margins.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
