To The Moon

It has been 5 days since $JPMorgan Chase(JPM)$ released its Q2 2023 quarterly earnings on Fri, 14 Jul 2023 morning, - before US market opens.

The bank has turned in a “stellar” set of results in its report card; no doubt about it.

This Q2 2023 quarterly earnings reporting is “tricky” because of the need to report both the bank’s set of data and also its purchased First Republic Bank’s assets.

In JP Morgan’s results presentation notes, there is a qualifier:

• Reported Revenue came in at $41.3 Billion; that’s a gain of +34%, YoY.

• Non-GAAP Revenue was $42.4 Billion; also a gain of +34% YoY, versus Wall Street expectations of $38.96 Billion.

• Non-GAAP Revenue (less First Republic) would be $38.4 Billion, that is “lower” than Wall Street expectations actually.

• Net Income came in at $14.5 Billion; that’s a gain of +67% YoY.

• Net Income (less First Republic) would be $12.1 Billion.

• Diluted EPS was $4.75; that’s a gain of +72% YoY, versus $4 per share per Refinitiv estimate.

• Diluted EPS (less First Republic) would be $3.95; that is again “lower” than Refinitiv estimate.

Having seen the veiled & un-veiled results, still upbeat about it?

JP Morgan's 4 main line of businesses

• JPMorgan’s Consumer & Community Banking (CCB) business line was the bank’s star performer in Q2 2023.

• Profits surged +71% to $5.3 Billion on a 37% jump in revenue.

• The bank also benefited from better-than-expected trading and investment banking activity.

• The bank has beefed up its provision for credit losses from $2.27 Billion (Q1 2023) to $2.89 Billion (Q2 2023); that’s a +27.31%.

• Revenue from “market & securities services” fell quarter on quarter. In Q1 2023, revenue of $9.3 Billion was reported, that is a +1.0% gain YoY.

• Non-interest expenses have gone up from $20.1 Billion (Q1 2023) to $20.8 Billion (Q2 2023).

JP Morgan’s Q2 2023 Results - Personal View:

• Things are not that rosy. at the bank (see above). Customers have withdrawn $200 Billion in deposits from the bank as the it deals with a long list of fines, losses and scandals.

• It was indeed a “blessing in disguise” that JP Morgan was able to acquire First Republic Bank (lock, stock & barrel) from FDIC; without regulatory scrutiny or suspicion about unfair competition, in times of “emergency” to prop up the banking sector.

• Unlike the Microsoft & Activision Blizzard story.

• The acquisition, added approx. (a) $203 Billion in loans and securities and (b) $92 Billion in deposits.

• Without asset “boost” from First Republic Bank, JP Morgan’s current quarter results would not have (i) weathered through headwinds faced by the Banking industry and (ii) presented a “glowing” report, that has beaten Wall Street estimates.

Is this reason why JP Morgan stock did not end on super “high” on Fri, 14 Jul 2023 by the time market closed for the week? (see below).

• JP Morgan Q2 results were released before market opens.

• It peaked at $152.58; that was a +2.49% gain from Thu, 13 Jul closing price ($148.87).

• It then fell to a low of $148.47, lower than Thu’s closing price.

• Before staging a marginal recovery, ending Friday up +0.60%.

• The bank’s stock price managed to rise further, thanks in parts other banks ( $Wells Fargo(WFC)$ , $Citigroup(C)$ , $Bank of America(BAC)$ & $Morgan Stanley(MS)$ ) who are partners-in-crime in reporting equally “credibile” results; further fuelling US market to rally this week’s Mon & Tue.

JP Morgan’s Outlook For Rest Of 2023:

1. Expect FY2023 net interest income & net interest income excluding Markets of ~$87 Billion, market dependent.

2. Expect FY2023 adjusted expense of ~$84.5 Billion excluding the FDIC special assessment related to systemic risk determination, market dependent.

3. Expect FY2023 Card Services net charge off (NCO) rate of ~2.60%.

Gross charge-offs is defined as “debt that is unlikely to be recovered and to be written off”.

A Net charge-off (NCO) is the dollar amount that measures the difference between gross charge-offs and any subsequent recoveries of delinquent debt.

• Do you think JP Morgan delivered a spectacular set of results for Q2 2023?

• Do you think the bank will be able to continue its deliverance for Q3 2023?

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