JPMorgan Reports Record Q2 Earnings But Downgrades Net Interest Income Forecast

JPMorgan Chase
JPMorgan Chase CEO Jamie Dimon speaks at the North America's Building Trades Unions (Photo: Reuters / Jeenah Moon)

JP Morgan Chase posted its second-quarter earnings report on Tuesday, revealing figures that exceeded analysts' forecast.  The company's earnings were heavily boosted by an income tax benefit, which lifted its results by $768 million. Despite its high earnings for the quarter, the bank decided to cut its forecast for the year's net interest income by $500 million to $57.5 billion.

The New York-based bank reported record-breaking second-quarter performance, with its profits soaring 16 percent higher to $9.65 billion. This resulted in profits of $2.82 per share, beating initial analysts' estimates of $2.50 per share.

The bank revealed that a one-time tax boost resulting from "certain tax audits" had lifted its earnings by 23 cents per share. The bank's revenues had also surged by 4 percent, compared to the same quarter last year, reaching $29.57 billion. The figure beat analysts' expectation of $28.9 billion for the quarter.

JP Morgan's fixed income trading business managed to increase its revenues by 7 percent to $3.69 billion, exceeding initial analysts' estimates of $3.36 billion. The bank did experience a drop in its equities trading business. The bank reported a 12 percent drop in its equities trading division to $1.73 billion, missing analysts' expectations of $1.84 billion.

In light of the recent developments in the geopolitical climate and features of interest rate cuts by the Federal Reserve, JP Morgan had decided to cut its forecast for the year's net interest income. The bank downgraded its forecasts by $500 million to $57.5 billion, a significant drop from its initial $58 billion targets.

Following the release of its second-quarter earnings report, JP Morgan's shares surged by 0.5 percent and as much as 1.8 percent in premarket trading.

The Federal Reserve recently hinted at its intention to cut benchmark interest rates within the month. The move will likely add pressure and reduce margins for major banks and their lending businesses. JP Morgan has so far been able to exceed analysts' expectations, mainly aided by higher interest rates.

The bank reported record profits for the first two quarters of 2019, but it is still yet to be seen how it will perform in the coming quarters.

JP Morgan is already assuming that the Federal Reserve will be cutting its rates. According to the bank's chief financial officer, Jennifer Piepszak, the firm is expected the Fed to cut rates as many as three times within the year. The executive explained that the bank's current forecast only accounts for one rate cut, which means that additional cuts will further downgrade its forecasts for the year. 

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