What's going on?
On Friday, JPMorgan Chase reported second-quarter results that beat investor expectations – as well as outshining rivals Citigroup and Wells Fargo.
What does this mean?
Investors weren’t expecting JPMorgan to do this well. The US’s biggest bank (as measured by assets) brought in revenues from its trading division – where its clients buy and sell stocks and bonds, among other things – that exceeded expectations by half a billion dollars and were 13% higher than this time last year. On top of that, its overall profit was nearly double expectations.
Contender Citigroup’s results were described as “pale in comparison” to JPMorgan’s (tweet this) – though Citigroup did beat profit expectations and grow its revenue by 2% on last year – and scandal-ridden Wells Fargo looked a little worse for wear, reporting both profit and revenue that were down from the same time last year.
Why should I care?
For markets: Sometimes winning is just not losing.
Shares of JPMorgan didn’t move by much on Friday – but at least they didn’t fall like rivals Wells Fargo’s and Citigroup’s did, by 1% and 2% respectively. The results were likely offset by concerns that higher US interest rates will squeeze banks’ profits sooner than investors had thought. Higher interest rates mean that borrowers have to pay more on their loans and depositors get more back on their savings. Investors were hoping that banks could increase what borrowers would have to pay before increasing what they pay out to savers – a nice little spot to be in – but it might not pan out that way.
The bigger picture: Investors are trading like nobody’s business.
There’s been a fair bit of global tension lately between the US-China trade war and its ramifications, political instability in Turkey and Italy (among other places) and the volatile oil price. All of this uncertainty has helped drive investors to reassess their portfolios – likely spurring the trading businesses of the big US banks over the last three months.