JPMorgan Chase & Co.: JPM Stock Set for a Strong Second Half

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JPMorgan Chase & Co. (NYSE:JPM) kicked off bank earnings season with a blast, as JPM stock rallied on better-than-expected earnings driven by loan growth and cost cuts.

JPMorgan Chase & Co.: JPM Stock Set for a Strong Second Half

It was just what bank investors needed to hear after a punishing month of Brexit fears and a further delay to any U.S. rate hike.

The good news extends well past the bank sector, however. JPM’s broad-based loan growth indicates a healthier U.S. economy as well. And just for good measure, fixed income trading — long an albatross for the industry — showed improvement as well.

In the most recent quarter, net income fell to $6.20 billion from $6.29 billion last year, but this quarter’s per-share earnings of $1.55 bested last year’s $1.54 a share. Analysts polled by Thomson Reuters were looking for earnings to come it at $1.43 a share.

Net revenue rose 3% to $25.21 billion from $24.53 billion, which also topped Wall Street estimates.

In the company’s consumer bank, the top line rose 4% to $11.45 billion, driven by deposits and loan growth. Customers relied more on their credit cards in the most recent quarter — deploying them more often and keeping higher balances — which just might signal greater confidence on the part of consumers.

As for the long-struggling capital markets side of things, trading defied the typical early summer swoon, thanks to Brexit and tumbling yields on fixed income. An increase in oil prices over the course of the quarter also boosted investors’ confidence in banks’ exposure to bad debt in the oil patch.

Finally, cost cuts — a central part of all banks’ strategies since the end of the financial crisis — continued apace. Operating expenses decreased an eye-popping 6% year-over year.

JPM Stock Poised to Turn Heads

Bank stocks have been duds so far this year and even the bargain hunters have had a hard time stepping in. The additional uncertainty unleashed by the Brexit — and what it means for interest rates at home and abroad — blew another tailwind up against these names. JPMorgan Chase stock hasn’t been immune. Indeed, JPM stock is off about 2% even after a strong move to the upside on earnings.

Perhaps the bank’s fairly encouraging quarter can make a few more investors believe in JPM stock. After all, on a market-wide basis they’re running out of places to go. With near-zero and negative interest rates pushing investors out of bonds and into stocks, a lot of sectors have developed silly valuations. (See: utilities.)

If the other big banks stocks can report this combination of encouraging operational and economic signs, sentiment could start to come around.

Don’t expect JPM stock — or any bank stock, for that matter — get the benefit of the doubt anytime soon. But their prospects are improving faster than their share prices, and that makes them attractive.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/jpm-jpmorgan-chase-stock/.

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