Commodities

JPMorgan cut earnings more than expected in Q2 and suspended buyback

Published

1 year ago

July 17, 2022

JPMorgan, the largest U.S. bank by assets, reported weak financial results for the 2nd quarter of 2022. Net income fell 27.6% YoY to $8.6 billion, or $2.76 per share, and was 13 cents below Wall Street’s average estimate. At the same time, ROE fell to 13%.

The bank’s quarterly revenue rose 0.7% (YoY) to $31.6 billion, but also fell short of the consensus estimate of $31.8 billion. Net interest income jumped 18.5% to $15.2 billion on higher lending volumes and a net interest margin (up 18 bps to 1.8%). Meanwhile, non-interest income sagged 11.6% to $16.4 billion.

Revenue in the retail division (CCB) fell 1.1% (YoY) to $12.6 billion due to a 25.8% decline in mortgage lending revenue to $1 billion and a 6.3% decline in auto and card lending revenue to $5.1 billion, while consumer and small business lending revenue rose 9% to $6.6 billion. Corporate & Investment Bank (CIB) cut revenue by 9.6% to $11.9 billion.

Revenues from investment banking fell 60.5% to $1.4 billion due to a sharp weakening of M&A activity in the world, as well as lower volumes of stock and bond offerings, while revenues from trading operations rose by 7.6% to $8.7 billion, helped by increased volatility in financial markets. Commercial banking revenues rose 8.1% to $2.7 billion and asset management revenues rose 4.8% to $4.3 billion, despite an 8.2% decline in assets under management to $2.7 trillion.

Operating expenses rose 6.1% to $18.7 billion, and operating efficiency (cost/income, or CI) deteriorated 3 pct. to 59.3%. At the same time, significant pressure on profits was exerted by the creation of loan loss reserves of $428 million (in Q2 2021, the bank, on the contrary, released $3 billion in reserves), which was due to the worsening outlook for the global economy.

JPMorgan’s assets were $3.84 trillion at the end of Q2, up 2.6% YTD and 4.3% (YoY). Loans rose 6.1% year over year to $1.10 trillion and deposits rose 7.2% to $2.47 trillion.

The total amount of provisions for possible loan losses amounted to $17.6 billion, or 1.69% of all issued loans at the end of the reporting period, up from $16.4 billion, or 1.62%, at the beginning of this year. The Tier 1 capital adequacy ratio (CET1) declined to 12.2% from 13.1% at the beginning of the year.

During the reporting period, JPMorgan returned $3.2 billion to its shareholders through share buybacks ($224 million) and dividend payments ($3 billion). At the same time, the bank reported that it had suspended the buyback to meet its reserve requirements.

According to Jamie Dimon, head of JPMorgan, the U.S. economy continues to grow, as does the labor market and consumer spending. Risk factors include geopolitical tensions, high inflation, deteriorating consumer confidence, and uncertainty about how high rates will go. All of these, combined with the conflict in Ukraine undermining global energy and food markets, are likely to have a negative impact on the global economy at some point in the future.

Despite the rather weak Q2 report, there remains a cautiously positive view of JPMorgan’s long-term prospects. While risks to the global economy have increased substantially in recent months, the onset of a global recession is not imminent, in our view.

And U.S. banks will continue to feel relatively well, although their results this year will not appear to be the strongest. We expect that thanks to its diversified business model, solid balance sheets, and strong positions in all major segments, JPMorgan will be able to get through a challenging 2022 without major shocks, and its earnings will resume growth as early as next year.

Commodities

Brent oil prices could reach $150 per barrel, says JPMorgan

Published

16 hours ago

September 25, 2023

Brent oil prices could reach $150 per barrel, says JPMorgan

In a recent forecast, JPMorgan has predicted a potential surge in prices to $150 per barrel. This prediction was made on Monday, as the financial institution observed escalating oil rates that have been on a consistent upward trajectory.

The bank’s forecast reflects the ongoing trend in the global oil markets where prices have steadily increased. The price of Brent oil, a benchmark for international prices, has been rising consistently, indicating a robust demand and tightening supply.

This prediction by JPMorgan comes amid a global economic recovery from the pandemic, which has seen an uptick in energy consumption across various sectors. The consequent rise in demand for oil and other energy commodities is putting upward pressure on their prices.

JPMorgan’s forecast is one of several indicators pointing towards a bullish trend in the global oil market. However, it remains to be seen how this potential surge will impact the broader economy and whether it will sustain over the long term. For now, investors and market stakeholders will be closely watching these developments in the oil markets.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Commodities

Gold prices hold steady amid Federal Reserve’s interest rate warning and global economic concerns

Published

16 hours ago

September 25, 2023

Gold prices hold steady amid Federal Reserve's interest rate warning and global economic concerns

Gold prices remained mostly steady on Monday, despite the potential for a further drop due to warnings from the Federal Reserve about prolonged higher interest rates. The strength of the dollar and yield pressures have also contributed to the situation. Over recent weeks, gold has shown minimal fluctuation in its trading range.

The Federal Reserve recently signaled that interest rates could rise again this year and may decrease less than previously anticipated in 2023, possibly remaining above 5%. This has caused investors to favor the dollar as a safe haven, as global economic conditions appear to be worsening.

Inflation is resurging in major economies due to rising oil prices, which could potentially hamper growth this year. Amid these circumstances and growing concerns about a possible U.S. government shutdown, gold has found some support.

Meanwhile, on Monday, industrial metals saw little movement due to escalating worries about additional economic challenges in China. The London Metal Exchange (LME) and nickel finished last week on a lower note. These concerns were amplified after China Evergrande (HK:) Group, a struggling property developer, announced it could not issue new debt due to an ongoing government investigation into one of its units.

China’s property sector is facing a cash crunch that has persisted for three years and has received limited fiscal support from Beijing. This week, attention will be focused on Chinese purchasing managers’ index data, scheduled for release on Friday, for further insights into business activity.

Oil prices rose on Monday as investors shifted their attention back to tighter supply outlooks. This shift occurred after Moscow implemented a temporary ban on fuel exports while remaining wary of potential further rate hikes that could dampen demand.

contracts ended their three-week winning streak and fell last week following the Federal Reserve’s hawkish stance which unsettled global financial sectors and raised concerns about oil demand. Prices had surged over 10% in the preceding four weeks due to predictions of a significant crude supply deficit in the fourth quarter, following Saudi Arabia and Russia’s decision to extend additional supply cuts until the end of the year.

Last week, Moscow temporarily banned gasoline and diesel exports to most countries in an effort to stabilize its domestic market. More updates on stock market trends and other business, political, tech, sports, and auto news are expected to follow.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Commodities

Oil prices steady as Russia eases fuel export ban

Published

16 hours ago

September 25, 2023

Oil prices steady as Russia eases fuel export ban

By Paul Carsten

LONDON (Reuters) – Oil prices held steady on Monday after Russia relaxed its fuel ban, taking the edge off earlier gains on a tighter supply outlook and wariness over interest rates that could curb demand.

futures were up 17 cents, or 0.18%, at $93.44 a barrel by 1133 GMT after settling 3 cents lower on Friday.

U.S. West Texas Intermediate crude was up 7 cents, or 0.08%, at $90.10.

Russia approved some changes to its fuel export ban, lifting the restrictions for fuel used as bunkering for some vessels and diesel with high sulphur content, a government document showed on Monday.

The ban on all types of gasoline and high-quality diesel, announced last Thursday, remains in place.

“The market continues to digest Russia’s temporary ban on diesel and gasoline exports into an already tight market, offset with the Fed’s hawkish message that rates will stay higher for longer,” said IG Markets analyst Tony Sycamore.

Crude prices fell last week after a hawkish Federal Reserve rattled global financial markets and raised concerns over oil demand. That snapped a three-week rally of more than 10% after Saudi Arabia and Russia constrained supply by extending production cuts to the end of the year.

Last week, Moscow issued a temporary ban on gasoline and diesel exports to most countries to stabilise the domestic market, fanning concerns of low products supply as the Northern Hemisphere heads into winter.

In the United States, the number of operating oil rigs fell by eight to 507 last week – the lowest count since February 2022 – despite higher prices, a weekly report from Baker Hughes showed on Friday.

Compounding supply constraints, U.S. oil refiners are expected to have about 1.7 million barrels per day (bpd) of capacity offline for the week ending Sept. 29, decreasing available refining capacity by 324,000 bpd, research company IIR Energy said on Monday.

Offline capacity is expected to rise to 1.9 million bpd in the week ending Oct. 6, IIR added.

Expectations of better economic data this week from China, the world’s largest crude importer, lifted sentiment. However, analysts flagged that oil prices face technical resistance at the November 2022 highs reached hit last week.

China’s manufacturing sector is expected to expand in September, with the purchasing manufacturing index forecast to rise above 50 for the first time since March, Goldman Sachs analysts said.