The Banking and Strategy Initiative

Chillin' out till it needs to be funded

The year when we discuss a Break up and get back to Trading: JP Morgan:: Bank Earnings Season 1Q2015

As JP Morgan spent their Investor Day showing, it is actually going to be fun for them to get the break up orders for the Consumer Bank, though they would not be unlocking much synergies. The Capital equations are already so awry that the hard work for that will easily cover for trivial pursuits of the Federal regulators though Deutsche Bank and the European banks are well grounded by the same laws as they are unable to independently capitalise in the US jurisdiction.

It is probably not going to show up this quarter but one expects JP Morgan to be on the right side of the Euro short, unlike Asian and European Banks still hedging the Euro for their ‘domestic’ business and trading uphill.  JP Morgan is betting however on a measured ramp up of interest rates which will be the small snag this quarter as trading volumes improve. Earnings due now, and the conference to begin before markets open, and one can see the Pre Market climbing well into the open.

JPM posts an EPS of $1.45, far better than the $1.28 last quarter and likely to be a part of the recovery to earnings of $1.60 and more as they continue buybacks and Revenues come back to 0.2 under the $25 Bln mark. Liquidity and Basel II Advanced Tier I positions are comfortable and still ramping up (likely ramping down in case of Liq as volumes come back and use up the available capital ). The bank has new authorization for buyback till 2Q16.

EPS would have hit $1.58 before legal expenses marking a well defined $687 mln for the Forex settlements

The Net Income has improved almost a $1 Billion from December, ROE up to 11% still low but expenses down by almost 500 million and the efficiency ratios looking up at 58% for the Consumer Bank. The bank should get into improving NIMs from here despite the spread pressures in a rising interest rate environment and even improve if spreads better after the deposit rates kept biting into it from 2011 onwards. The increase in Cash and Deposits at 46 and 38 Bln mean a NIM compression to 2.07%

The Consumer Bank topline splits $10B+ for consumer bank with $3.75 Bln in FEes and Charges, $1.7 Bln for the Mortgage bank and $4.6 Bln in Cards and Auto, the last $6.3 Bln incl servicing expense and showing Net FEes of only $2 Bln. Credit Costs are climbing now as the LLRs are done and dusted

Investment Bank fees is up to $1.75 bln, trading revenues independently increasing $2 Bln to $5.6 Bln with the Fixed income business back in the game, Net Income from CIB at 250% of December at $2.5 Bln

Overheads are down to 59% veven as Comp ratios return to a normal 32% after a sub par December

Commercial Banking, Asset Management and Corporate  (including the CIOs office) are neither up or down in the first three months of 2015. May have some updates after the conference but it looks all in the black, so i will get back to my books again tonight.


This entry was posted on April 14, 2015 by in Uncategorized.


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