Stock Market »JPMorgan Earnings Overview and JPM Stock Analysis

JPMorgan will kick off its US earnings season this week and stock traders will closely monitor the bank’s performance in the face of a myriad of challenges.

When will you publish JPMorgan’s first quarter 2022 results?

JPMorgan is expected to release first quarter 2022 results before US trading opens on Wednesday, April 13.

It will be the first major US bank to report, kicking off the new earnings season. Wells Fargo, Morgan Stanley, Goldman Sachs, Citigroup and US Bancorp are all expected to release first quarter results before the stock market opens on Thursday, April 14.

Read also »Overview of the results of US banks


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JPMorgan results overview for the first quarter of 2022

US banks posted record revenues and unexpected profits in 2021 as they released large provisions set aside during the difficult times when the pandemic dominated the previous year and investment weapons reaped the rewards of very active markets.

But the outlook for 2022 is hampered by a new set of threats. Just last week, JPMorgan CEO Jamie Dimon released his widely followed annual letter to shareholders, warning that the banking sector “faces challenges at every turn,” an uncertain economic outlook and runaway inflation to the global crisis that has erupted in. following the Russian invasion of Ukraine.

Dimon first took a look at the cost of the Ukrainian crisis in his letter, stating that the bank “is not concerned about our direct exposure to Russia”, warning that it still expects to lose “about $ 1 billion over time. We could see the first impact of this start being felt when first quarter results are released.

Additionally, the industry will face tough comparisons this year, making it harder to impress markets after 2021’s record numbers. For example, more than $ 9 billion of the $ 48 billion in earnings JPMorgan posted last year comes from the one-off outflow of credit reserves, and while we may see further liquidation of provisions in 2022, it will be far from the level investors have become accustomed to over the past year or so.

On the positive side of US banks, rising inflation – currently at a 40-year high of around 8% and well above the US Federal Reserve’s 2% target – should push the central bank to rise. interest rates several times this year, which in turn should increase the profits banks can make on loans and mortgages. The Fed raised rates for the first time since 2018 last month and is likely to continue, which will help offset the decline in credit normalization and trading since its capital markets split.

Dimon said that while he supported the Fed’s decision to take dramatic action to protect the economy during the pandemic, fiscal spending and QE were “probably too much and have gone on too long.”

“I don’t envy the Fed for what it needs to do next: the stronger the recovery, the higher the rates that follow (I think they could be significantly higher than the markets anticipate) and the greater the quantitative squeeze. Dimon said in the letter of him to shareholders. He said the Fed had to move away from the idea of ​​having to raise rates by 25 basis points at the same time and at regular intervals, urging the central bank to be more responsive to economic data and real timely events rather than following a predetermined Plan.

While US banks expect higher interest rates, the focus is on how to keep costs down and protect profitability in the meantime. Costs are currently increasing at a much faster rate than revenues. With this in mind, analysts believe JPMorgan’s return on equity will drop closer to 12.1% in the first quarter, from 16% in the last three months of 2021. This would also be a steep drop from the 23% ROE. published a year earlier. . Return on Tangible Equity (ROTCE) is expected to drop to 14.6% from 29% the previous year.

This is compounded by the fact that costs are rising at a time when JPMorgan is also ramping up its technology investments and expansion into the UK retail banking sector, with capital spending expected to rise 30% in the UK. 2022 to approximately $ 15 billion.

This is a subject of controversy with some investors, as JPMorgan said it may not meet its medium-term ROE target of 17% this year and possibly next year. It has been suggested that shareholders are unhappy with the lack of details released on its spending plans, which could put pressure on the bank to release more information when it releases the results this week.

However, some believe investors may have to wait until the bank holds Investor Day on May 23 to find out more.

Wall Street expects JPMorgan to report a 6.1% year-over-year decline in first quarter managed revenue to $ 31.1 billion and EPS will drop more than 39% to $ 2.73 from $ 4.50 in the previous quarter. ‘last year.

What is the stock market outlook for JPM shares?

After reaching new all-time highs in 2021 with record numbers, JPMorgan shares have been under pressure for the past three months and the stock has fallen 22% on the stock market since mid-January.

We could see JPMorgan shares continue to slide towards the 14-month closing low of $ 128 during the last leg of the downtrend that started this month. This floor has to hold up to avoid opening the doors at the $ 124 resistance level seen in late 2020.

The RSI is firmly in bearish territory suggesting that the stock may be under further pressure and this is supported by a slight increase in volumes over the past five days from the 10-day moving average. A month ago we saw the 100-day moving average SMA drop below the 200-day moving average SMA a month ago and the 50-day moving average SMA continues to decline further south than the previous two.

JPMorgan daily chart (NYSE: JPM).

Source: Tradingview, Stone X

On the upside, the 50-day moving average SMA, which is currently at $ 142 and is in line with its March highs, has proved to be a high over the past five months as JPM stocks have only been successful to outstrike the move. average only briefly.

After falling significantly below this ceiling in April, we will likely see the price return to this level once the current downtrend in the equity market starts to reverse. This is the first upside target it needs to breach to build confidence in an upward move to the 100-day SMA at $ 151 and then the 200-day moving average at $ 156, in line with the February moving average. high.

Brokers remain bullish on JPMorgan and the 29 brokers covering the company currently have an average buy rating and a target price of $ 167, implying that there is upside potential of over 27% in the price. Peak 2022.

By Joshua Warner FOREX.com »Official site

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Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell any forex or CFD exchange contracts. Although the information contained herein comes from sources believed to be reliable, the author does not guarantee its accuracy or completeness and assumes no responsibility for any direct, indirect or consequential damages that may arise from anyone who relies on such information.

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