What's going on?
America’s biggest bank, JPMorgan Chase, announced a first-quarter profit on Friday that was higher than any other US bank’s, ever – and better than investors expected.
What does this mean?
Late last year, one of the weakest areas for banks was fixed income trading (of things including bonds, currencies, and commodities), but JPMorgan’s fixed income revenue last quarter actually exceeded forecasts. JPMorgan also beat revenue forecasts in its advisory business, helping companies organize mergers and raise money – even as the number of deals fell precipitously from a year ago.
Despite a narrower difference between the yields of short- and long-term government bonds and a pause in interest rate increases, both of which may discourage lending, profit in JPMorgan’s consumer banking business was 20% higher than a year ago.
Why should I care?
For markets: Papering over the cracks?
JPMorgan’s stock rose 5% on Friday – investors seemed to ignore the profit decline in its investment banking business, perhaps enthralled by its consumer banking business. As more banks lift the lid on their latest quarters, investors are bracing for some bad news: Switzerland’s UBS described its last quarter of one of the worst in recent history – it now plans to slash costs further. And last week, Citigroup joined Britain’s Barclays in parting company with its investment banking head.
For you personally: It’s not just about major investors.
Shares of Plus500 – a trading platform that allows retail investors (i.e. not big institutions) to bet on asset prices – fell 30% on Friday after it announced a drop in revenue thanks to falling customer activity. New European rules limiting “leverage” (borrowed money that investors can use to make these bets) were partly to blame. Shares of Plus500’s British rivals IG Group and CMC Markets also fell – they’re subject to the same slowing trends.