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Mark O' Donnell
Research Analyst
July 15, 2022

Finding the silver lining in JPMorgan’s Q2 earnings report

  • JPMorgan Chase reported a 28% fall in earnings from a year earlier in its second-quarter earnings
  • Rising US interest rates and a growing book of loans are two positive factors for the firm moving forward
  • JPM stock fell 3.5% on Thursday after the release of its earnings

Yesterday, JPMorgan Chase (NYSE: JPM) reported that the bank's second-quarter earnings fell as a result of adding $428 million in bad loan reserves.  

With this view, JPMorgan has chosen to temporarily halt its share repurchases in order to meet regulatory capital requirements. 

According to a statement from JPMorgan, the reserve rise was primarily to blame for the earnings decline of 28% from a year earlier to $8.65 billion. Additionally, JPMorgan, which has one of the largest operations on Wall Street, was hurt by the slowdown in Wall Street transactions. Investment banking fees dropped sharply by 54% to $1.65 billion, $250 million less than the forecasted $1.9 billion. 

Fixed income trading revenue increased by 15% to $4.71 billion, Although, strong results in macro trading were offset by a decline in credit and securitized products, resulting in a quarter-end revenue that was below analysts' $5.14 billion projection. 

On the positive side of its report, revenue from equity trading increased by 15% to $3.08 billion, beating the estimate of $2.96 billion. Rising US interest rates and a growing book of loans are two positive factors for the firm. For the quarter, net interest income increased by 19% to $15.2 billion, exceeding analysts' expectations of $14.98 billion. JPMorgan stated during the firm's investor day in May that rising rates will allow it to surpass its main goal of 17% returns this year faster than anticipated. However, the firm has achieved that goal this month. 


JPM stock dropped about 5% in intra-day trading on Thursday but found the support to finally settle only 3.5% lower at closing. JPM now trades at a 90-week low, but with a rumored 100 basis-points rate hike due from the US Federal Reserve within a couple weeks, perhaps bank stocks will find their bottom before the rest of the market

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