What's going on?
It ain’t called JPMorgan Chase for nothing: the investment bank doggedly held its pace during the worst of the coronavirus crisis, and it reported better-than-expected second-quarter earnings on Tuesday.
What does this mean?
JPMorgan’s quarterly revenue and profit came in higher than investors expected. That was thanks to the company’s trading and debt issuance segments, which were respectively boosted by market volatility (as stocks bounced back in April) and by companies selling new bonds while the going was good. That even offset the drag on earnings caused by the greater-than-expected amount of cash JPMorgan had to put aside for potential loan losses.
There was a similar story across Wall Street: rival Citigroup’s second quarter was better than expected thanks to a strong showing from its trading business – and despite weakness in its bigger consumer banking segment.
Why should I care?
For markets: Everything’s coming up JPMorgan.
At the end of last quarter, JPMorgan warned that this quarter would be the worst of the pandemic – meaning investors might be expecting things to get even better from here on out. But exactly how much better comes down to a couple of factors. For one, it depends whether excitable investors will keep chopping and changing their portfolios, in turn boosting JPMorgan’s trading business. And for another, it depends on the wider economy: if US unemployment stays above 10% until next year (like JPMorgan’s predicting), individuals and businesses will be less likely to pay back their loans.
The bigger picture: Not all banks.
JPMorgan has one of the biggest trading businesses out there, so it’s perhaps no surprise it benefited more than its competitors. And that difference might explain why JPMorgan’s stock rose 1% while Citigroup’s fell 2% (tweet this). Rival Wells Fargo announced results too, revealing its first quarterly loss since 2008 and cutting its dividend by more than expected – and investors sent its shares down 5%.