What’s Going On Here?

JPMorgan became the 1st investment bank to reveal its first-quarter results – and they seemed to like what they saw.

What Does This Mean?

While JPMorgan’s total revenue was slightly lower than investors had predicted, the bank did well where it mattered most.

• Its “net interest income” was higher than expected, even though the Fed cut US interest rates to a record low in March. That rate cut encouraged investors to chop and change their portfolios, which earned JPMorgan’s trading business more in commissions and led to the segment’s highest-ever quarterly revenue
• It didn’t come out completely unscathed: with companies dithering on deals and fundraising, the bank made less from advising than expected.

Why Should I Care?

For markets: No pleasing some people.

• JPMorgan’s stock rose after its announcement: the boost to its trading business might be temporary, but its dividend is intact.
• Still, the bank and some of its rivals suspended their lucrative share buybacks last month, and that suspension meant large American banks went from paying out 135% of their expected 2020 earnings on average to just 45%.

The bigger picture: Dividend and conquer.

• JPMorgan cautioned investors that lower rates will ultimately limit its net interest income, which could lead to even lower dividend payments.
• Moreover, the recent change in accounting rules means JPMorgan now has to put money aside for potential loan losses upfront. That cost JPMorgan a higher-than-expected $8 billion last quarter, and it was the reason its profit fell almost 70%
• Still, since the bank’s increased costs weren’t its fault, investors didn’t pay much attention to its lowered profit.

Content source: Finimize. (2020) TWinner Takes All. Bloomberg. Available from: https://www.finimize.com/wp/news/winner-takes-all/ [Accessed at 15 Apr, 2020]