Jamie Dimon's JPMorgan Chase Just Posted 86% Growth in Equities Trading Revenue and Raised Its Full-Year Net Interest Income Guidance to $105.5 Billion
Key Points
The bank saw record revenue in every business line.
Equity markets, in particular, surged due to strong overall market activity.
JPMorgan Chase also raised its full-year net interest income guidance, a major source of revenue for the bank.
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Investors had lofty expectations heading into second-quarter bank earnings reports, and JPMorgan Chase (NYSE: JPM) rose to the occasion.
On July 14, JPMorgan Chase reported adjusted earnings per share of $6.14, nearly $0.30 ahead of Wall Street consensus estimates. Adjusted revenue of $52.4 billion also topped estimates by over $2 billion. The stock rose 2.5% on the day.
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Notably, the bank achieved record revenue across each major line of business and reported an overall 23% return on tangible common equity (ROTCE), well above the bank's long-term ROTCE guidance.
JPMorgan Chase also reported a massive 86% year-over-year increase in its equity markets trading business, while raising its full-year net interest income (NII) guidance to $105.5 billion.
Diving deeper into the results
All of JPMorgan Chase's businesses were thriving in the quarter, but equity markets were a particular standout. Revenue of over $6 billion came in significantly higher than in each of the prior four quarters.
On JPMorgan Chase's second-quarter earnings call, CFO Jeremy Barnum attributed the sensational quarter of trading to one-time events unlikely to recur.
"We had some major IPOs. We had some major index rebalancing. We had some very complicated dynamics in the Korean equity market. There's been a lot of activity in Asia. The overall environment has been dynamic and interesting across a whole variety of dimensions. The clients have been extremely active," Barnum said.
JPMorgan Chase also raised its full-year guidance for NII, which is essentially the spread revenue the bank earns between the yield it pays on customer deposits and the yield it earns on loans and bonds.
JPMorgan Chase raised its guidance from $103 billion last quarter to $105.5 billion, including markets revenue. This comes from the yield the bank earns on various bonds, derivatives, and foreign currencies it holds in its trading business.
Interestingly, Barnum said that markets' NII drove the higher guidance, due to changes in balance sheet composition. Typically, markets NII declines when rates are higher in the quarter.
Overall, the bank had a very strong quarter. Credit quality also continues to look quite benign. Total nonaccrual loans and nonperforming assets both fell from the prior quarter and year over year. Net charge-offs -- loan losses unlikely to be recovered -- rose slightly, but were nothing to be alarmed about.
Thirty-day delinquencies also declined. While not exactly cheap by historical valuation, JPMorgan Chase remains a long-term buy-and-hold stock, in my view.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
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