's better-than-expectedsecond-quarter results,bolstered by high trading volumes and healthy loan demand, could prove a precursorfor other big banks as earnings season unfolds, analysts say.
The New York-based bellwether per-share earnings of $1.46 — according to a Bloomberg assessment that excluded specialitems — exceeding by 3 cents the S&P Global consensus normalized EPS estimate for thesecond quarter. JPMorgan executives, speaking with analysts July 14 after releasingthe results, credited in part a boom in trading volume that emerged in June afterU.K. voters surprised markets and decided to leave the European Union. That ignitedvolatility that JPMorgan traders capitalized upon.
A 13% jump in trading revenue, to $6.5 billion, helpeddrive up the company'soverall top line by nearly 3% from ayear earlier, to $25.2 billion. Fixed-income trading revenue swelled 35%.
Gerard Cassidy, an analyst at RBC CapitalMarkets, said he expects other big banks with large trading operations, includingCitigroup Inc., to alsoreport results that show strong trading gains. "The success of [JPMorgan's] trading was driven by volume,and I would think everybody saw that volume," he said in an interview.
JPMorganwas the first of the big U.S. banks to post results. Wells Fargo & Co. and Citi are scheduled to follow suita day later, followed by Bank of AmericaCorp. on July 18.
On thelending side of the business, JPMorgan also recorded a gain that executives saidreflected a strengthening consumer-driven U.S. economy. Total loans rose 10% from a year earlier, with notable advancesin auto and mortgage lending, among other areas. CFO Marianne Lake said on the analyst call that loan demand was favorable broadly and that consumerconfidence appeared healthy.
"This is exactly what we were looking forin this quarter's earnings season" and it "should bode well for the other"large-cap U.S. banks, Vining Sparks analyst MartyMosby said in a note.
JPMorgan's top line in its consumer and community bankingdivision rose 4% from a year earlier. Overall net interest income rose 6% to $11.7billion.
"Thisshows to investors that consumer lending is coming back strong," Cassidy said. "You haveto think that other big consumer lenders like Wells Fargo and Bank of America andothers … will show good growth."
JPMorgan was able to generate growth while keeping expenses and credit costs in check,another positive sign for the industry, analysts said.
Noninterest expenses of $13.6 billion fell 6% froma year earlier.
JPMorgan's provision for credit losses of $1.4 billion was up from$935 million a year earlier, due to reserve increases in the second quarter andreserve releases in the prior-year period. The increases reflected in part highernet charge-offs in the company's energy portfolio. Energy customers have struggledamid a protracted oil-price slump.
But oil prices did stabilize during the second quarter, and JPMorgan'sreserve level for the period was down from the first quarter, a positive sign forother banks with oil-and-gas loan books, observers said.
JPMorgan's results "are not bad at all," MikeMatousek, a trader at U.S. GlobalInvestors Inc., said in an interview. "They are executing well, runninga tight ship, and conditions in a lot of ways seem to be working in their favor."
All ofthat, he said, infused new investor confidence in big banks following JPMorgan's earnings release. "The big banks areup and they should be," Matousek said.
Sharesof JPMorgan rose more than 2% in morning trading July 14. Shares of Wells Fargo,BofA and Citi all traded in positive territory as well.