JPMorgan Chase Reports Strong Q2 Results Despite Concerns

JPMorgan Chase (JPM -1%) is trading slightly lower after reporting second-quarter earnings. The company reported a solid EPS beat, and revenue rose 22% year over year to $50.8 billion, beating expectations. CEO Jamie Dimon was not present for the call because he was traveling abroad, but shared his insights in a press release.

• JPM reported consolidated provision for credit losses (PCL) of $3.05 billion, including net charges of $2.2 billion and net write-offs of $821 million. Net charges increased $820 million, primarily due to Card Services. Charges from the prior year were $2.90 billion, with net charges of $1.5 billion and net write-offs of $1.4 billion.
• In Consumer & Community Banking (CCB), revenue increased 3% year over year to $17.70 billion. Banking & Wealth Management revenue decreased 5% to $10.4 billion. Home Lending revenue increased 31% year over year to $1.32 billion. Card Services & Auto revenue increased 14% to $6.01 billion, reflecting higher net interest income and card income.
• CCB opened more than 450,000 new checking accounts. Client investment assets increased 14% to $1.0 trillion, with a record number of first-time investors. Card loans increased 12%, driven by solid customer acquisition of 2.4 million. In the Commercial & Investment Bank (CIB) segment, revenues increased 9% year-over-year to $17.92 billion. Investment Banking revenues increased 46% year-over-year to $2.5 billion. Asset & Wealth Management revenues increased 6% year-over-year to $5.25 billion.
• JPM noted that market valuations and credit spreads suggest a benign economic outlook, but the firm remains cautious about potential stress risks, especially given the complex geopolitical environment.
• While progress has been made in containing inflation, JPM highlighted ongoing inflationary pressures, including large fiscal deficits, infrastructure needs, trade restructuring, and global rearmament. The firm expects inflation and interest rates to remain higher than market expectations, and the full effects of quantitative tightening are still uncertain.

Overall, positive EPS and revenue results, along with strong growth in Investment Banking and Home Loans, are somewhat offset by strong growth in PCL. The net reserve build of $821 million was unexpected following the release of net reserves of $72 million in Q1. Despite the overall positive comments, this build suggests that JPM has some near-term economic concerns.

Wells Fargo (WFC-7%) AND Citigroup (C -2.8%) also reported lower profits this morning, raising concerns about reports from other banks next week.