JPMorgan Chase & Co. (NYSE:JPM) stock is headed higher in Thursday’s premarket trading after the company opened banks’ Q1 earning season with a bang. JPM stock is projecting a mere 1% gain this morning, but investors can expect a lot more in the coming weeks.
JPMorgan posted top- and bottom-line beats, including a sizable jump in profits. (More on that in a minute.) But it’s not just the numbers in this report that are likely to drive shares higher.
The strength in the quarter looks both broad-based and replicable going forward. Peers Wells Fargo & Co (NYSE:WFC) and Citigroup Inc (NYSE:C) both offered up solid quarters, implying beneficial conditions across the industry. Citigroup earnings beat consensus as well, while WFC’s revenue weakness appears largely related to self-inflicted wounds.
JPM stock had declined heading into the Q1 report, as concerns about President Donald Trump’s ability to drive bank-friendly regulation and the number of Federal Reserve rate hikes led to a pause in a big post-election rally.
But between JPMorgan’s competitors’ reports and its own sterling quarter, there’s enough to suggest that the rally in JPM shares will start again.
JPMorgan’s Strong First Quarter
Across the board, the JPMorgan Q1 earnings report looks outstanding, with one notable exception.
Earnings for the quarter jumped a sharp 22% year-over-year to $1.65 per share, easily topping estimates by 13 cents. Margins were healthy, with the 22% increase in earnings per share coming on 6%-plus revenue growth to $25.59 billion. Return on equity returned to double digits, rising to 11% from 9% in Q1 2016.
Among the high notes:
- The Corporate & Investment Bank segment was the star of the quarter, with net income rising a whopping 64% to $3.2 billion.
- Investment banking revenue rose 34% year-over-year, likely boosted at least in part by fees from the Snap Inc (NYSE:SNAP) initial public offering.
- Fixed-income revenue increased 17%, thanks to strength in Europe.
- Loss provisions reversed to a benefit, largely due to an improvement in the oil and gas sector.
- JPMorgan Chase maintained its No. 1 rank in investment fees on a global basis as well.
Commercial Banking posted impressive results, too, with profits up 61% on a 12% increase in revenue. An increase in Fed rates helped net interest income, and there too O&G improvement led to a reversal in credit loss provisions. Asset & Wealth Management did see income decline, but excluding a one-time gain on sale in the year-prior quarter and higher legal expense results appear to have been solid.
The one area of concern is in the consumer banking business.