JP Morgan Chase & Co.
JPMorgan Chase & Co. second quarter results were disappointing, with GAAP EPS of $2.76, which were $0,13 below market estimates. Revenue of $30.7bn also missed market estimates by $1.12bn, which resulted in the company suspending share buy backs.
The reason for this suspension was due to the need to build additional net reserves by $428m and $657m and further provisions in times of economic uncertainty, following the Federal Reserve Banks’ tightening of regulatory requirements.
Jamie Diamond, the long standing, and highly experienced group CEO, who has a proven track record, believes that business credit metrics in the USA are still in good shape.
JPM has had an exemplary track record of delivery through challenges brought about by changes in the business cycles.
The group has raised its net income guidance from $53bn to $56bn in 2022, due to the positive impact of rising interest rates, with expenses maintained at $76bn to $77bn, despite additional expenditure on IT which should bring about further efficiencies as well as increasing headcount of skilled operatives.
The decline in profits comes off a high base where investment banking fees were elevated due to buoyant activity in the IPO equity markets, with substantial deal flow activity.
The company has a strong balance sheet, despite economic headwinds, and a diversified business model and revenue streams, which should enable it to deliver sustainable returns through most economic and regulatory operating conditions.
Dividends have been maintained at $1.00 per share resulting in an attractive dividend yield of 3.60%, and a PE for the current year of 8x to 10x at the current share price. The return on equity (ROE) was a relatively impressive 13%.
JP Morgan, the largest US bank, encompasses consumer, commercial and investment banking, which should prove to be defensive in the current challenging economic environment, and has been conservative in setting aside funds for loan losses. The share price has declined by 33% this year, and now appears attractive for long term patient investors.
