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.

JP Morgan Chase & Co.