14 April 2020

Can Investors Bank on JPMorgan?

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What’s happening: JPMorgan Chase is scheduled to report its earnings results for the first quarter before the opening bell on Tuesday, April 14.

What happened: JPMorgan will kickstart the brutal earnings season today with its Q1 release. Earnings from JPMorgan, which weathered the 2008 crisis better than any other firm, will give investors some insights into the overall banking sector and the impact others are likely to face from the coronavirus outbreak.

The banking giant’s CEO Jamie Dimon has returned to office after facing health issues and his letter for the annual filing mentioned that the economic impact from the virus is likely to be as severe as the 2008 financial crisis.

  • The consensus revenue estimate stands at $29.45 billion, representing a 1.3% year-over-year decline.
  • The estimate for earnings is $2.20 per share, a 17.0% decline from the same quarter in the previous year.

Why it matters: After reporting strong fourth-quarter results driven by an increase in client activities, the banking giant’s trading revenues are expected to continue the upward momentum in the first quarter.

Markets have recently been very volatile due to the coronavirus impact. With strong volatility and an increase in client activities, the bank’s trading business is expected to receive a boost. JPMorgan’s revenue from equity and fixed income markets are also projected to improve in the quarter, with investors moving toward safe-haven assets, including Treasury bonds and gold.

JPMorgan has consistently repurchased around 5% of its shares every quarter over the past two years. Given the current crisis, investors are keen to know this quarter’s repurchase numbers

In an effort to support its employees, JPMorgan has announced plans to pay $1,000 to its front-line employees, who are working on-site during this coronavirus pandemic. The bank also announced plans to shut around 1,000 branches and pay its employees working from home for their scheduled hours.

How the shares have performed so far: JPMorgan’s stock has attracted some positive investor sentiment coming into its quarterly earnings. Although the bank’s stock has declined by around 6% over the past month, it has gained over 16% in the past five days. JPMorgan has faced the current crisis much better than its peers, with shares down by 30% year-to-date, much lower than rival Wells Fargo’s 42% decline in the same period.

What to watch: JPMorgan is the first to report results for this quarter’s earnings season, which has been hurt by the coronavirus. As the banking sector was strong prior to the arrival of the virus in the US, major banks including are expected to rebound strongly once the US economy returns to normal. Investors will also keep an eye on the bank’s outlook

The Markets Today

     

Investors will be watching European indices today, with the region’s markets opening after the long weekend.

Context: European stocks closed higher on their last trading day after the US Federal Reserve disclosed a $2.3 trillion stimulus plan to help ease the impact of COVID-19 on its economy. European markets were closed on Friday and Monday for the Easter holidays.

Details: European stocks started Thursday on a weak note as investors were mostly cautious ahead of the long weekend, but markets turned positive following the Fed's stimulus announcement. Investors also turned more optimistic on news of a slowdown in coronavirus infections in various parts of the continent.

Economic data from the region held up. Although UK’s economy contracted in February, with GDP declining 0.1%, this was widely expected. Meanwhile, Germany's exports rose 1.3% and imports fell 1.6% in February.

The pan-European Stoxx 600 index rose 1.4% on Thursday, with travel and leisure stocks among the top performers, gaining more than 4%. The benchmark index closed 7% higher on the week. The FTSE 100 climbed 2.9%, while the German 30 index rose 2.24% on Thursday.

Shares of Cineworld climbed more than 27%, while business outsourcing giant Capita saw its shares surge around 20%.

Investors will be monitoring the coronavirus numbers in the continent. The number of positive COVID-19 cases in Italy has surpassed 159,500, with around 20,460 deaths. Spain has so far confirmed more than 170,000 cases, with 17,750 fatalities.

What to watch: Investors will be keeping an eye on the European Union’s finance ministers to announce fiscal measures to limit the economic impact from the coronavirus pandemic. No major economic data is scheduled for release from the Eurozone today

Other Markets: Most US indices closed lower on Monday, with the Dow and S&P 500 down by 1.39% and 1.01%, respectively. The Nasdaq 100 bucked the trend, rising 0.48%.

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What else to watch today

     

India’s wholesale price index change, Indonesia’s lending facility rate and deposit facility rate, Brazil’s IBC-Br economic activity index as well as the US Redbook index, import and export prices.

 

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