JPMorgan shares drop after bank warns borrower defaults could get ‘meaningfully’ worse

Earnings

Jamie Dimon, chief executive officer of JPMorgan Chase & Co.

Giulia Marchi | Bloomberg | Getty Images

JPMorgan Chase posted record trading revenue amid the surge in volatility in the first quarter. 

The bank posted quarterly per share earnings of 78 cents, a figure that missed analyst’s estimates as the bank added $6.8 billion to loan loss provisions.

“JPMorgan Chase performed well in what was a very tough and unique operating environment,” CEO Jamie Dimon said in the release. “In the first quarter, the underlying results of the company were extremely good, however given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter.”

Here’s what Wall Street expects:

  • Earnings: $1.84 per share, a 31% decline from a year earlier, according to Refinitiv.
  • Revenue: $29.67 billion, a 0.6% decline from a year earlier.
  • Net Interest Margin: 2.37%, according to FactSet
  • Trading Revenue: Fixed income $4 billion, equities $2.08 billion

JPMorgan is the first major U.S. bank to report earnings. Investors will be examining its results to glean how the coronavirus pandemic has impacted the bank’s retail banking and capital markets operations.

Bank stocks have been pummeled this year as the pandemic put an end to the longest economic expansion in U.S. history. Struggling companies across sectors have laid off millions of Americans and tapped bank credit lines, and investors will be looking out for how retail and corporate loan losses are developing. 

As the world’s biggest Wall Street firm by revenue, JPMorgan has also benefited from surging volatility and higher demand in its trading operations. At the firm’s annual investor day, JPMorgan co-president Daniel Pinto told bank investors that trading was headed towards a “mid-teens” percentage increase.

Investors will be keen to hear if Dimon, who returned to work recently after a heart procedure, will issue any guidance on how the bank will navigate the rest of the year, as well as an outlook on how lower interest rates will impact earnings.

Dimon said last week in his annual shareholders’ letter that the bank’s earnings “will be down meaningfully in 2020” from the record profit it posted last year. He also warned investors that if the downturn is “extremely adverse,” the bank will probably consider suspending its dividend to preserve capital.

This story is developing. Please check back for updates.

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