Proactive Investors - JPMorgan Chase (NYSE:JPM) & Co (NYSE:JPM, ETR:CMC) shares traded lower before Friday’s opening bell after the investment banking firm's full-year guidance for a key metric fell short of expectations, despite reporting increased revenue and profits for the first quarter.
Net interest income (NII) increased 11% year-over-year to $23.2 billion in Q1. However, this marked a 4% sequential decline attributed to “deposit margin compression and lower deposit balances.”
The firm upped its full-year NII forecast excluding trading from its previous estimate of $88 billion to $89 billion, however, this fell short of the $90.7 billion expected by the Street.
For Q1, JPMorgan said its profits increased by 6% to $13.4 billion or $14 billion excluding a $725 million increase to the FDIC special assessment.
Earnings per share were $4.44, up 8% and above expectations of $4.18.
Revenue increased by 6.6% to $41.9 billion, ahead of estimates of $40.9 billion.
Assets under management increased 19% to $3.6 trillion.
JPMorgan CEO Jamie Dimon noted that many economic indicators continue to be favorable but looking ahead the firm remains alert to “a number of significant uncertain forces.”
He pointed first to the “unsettling” global landscape. “Terrible wars and violence continue to cause suffering, and geopolitical tensions are growing,” Dimon said.
“Second, there seems to be a large number of persistent inflationary pressures, which may likely continue. And finally, we have never truly experienced the full effect of quantitative tightening on this scale. We do not know how these factors will play out, but we must prepare the firm for a wide range of potential environments to ensure that we can consistently be there for clients.”
JPMorgan shares traded down 3.6% at about $188 before the stock market opened on Friday.
“The glitch in these earnings was the net interest income estimate for 2024,” XTB research director Kathleen Brooks observed.
“Why is the market treating these results as a mini disaster, when the difference between net interest income forecasts is within the margin of error? This is where psychology comes in.” Brooks said.
“The market is getting used to seeing blowout earnings and nice upside surprises, after the likes of Nvidia (NASDAQ:NVDA) and JPMorgan have posted amazing results in recent quarters. Anything less than a blow out quarter is a disappointment, even though JPMorgan has once again showed its prowess in generating revenue and still has a ‘fortress balance sheet’.”
Brooks does not believe the selloff of JPMorgan shares will last.
“It is still hard to see a sustained selloff in JPMorgan shares, as its earnings report was generally strong and its forward price to earnings is only 11.57 for 2024, vs. a P/E ratio of 24 for the S&P 500 as a whole,” she said.