The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Bank Earnings Season 3Q2015: JP Morgan’s hurrah! muted in after hours announcement

This quarter’ expectations from banks are supposedly in the nature of a subdued hum of “This too shall pass” from the buoyant fightback mid crisis all these years since the August /September of 2008. However, as expected by myself, JP Morgan is far out ahead of the bad news and likely to maximise a not so improbable good run in the markets on the back of a brilliant quarter, unaffected by cuts in Fixed Income trading , mortgages and oil reserves as it posted at $1.68 in Earnings per share for the September quarter, likely in tune with another big year with or without any announcements from the Fed finally increasing interest rates. That is of course helped by banks already holding a short assets strategy that makes them gainers when rates do go up, the wait actually to none of their advantage.

The $1.32 per share earnings number after adjustments excludes $2.2 billion in tax benefits and any additional reserves including on Oil & Gas are more or less still being made up by reserves winding down. The Total assets have contracted another $160 Billion Core loan is back, and retail bank growth is more than making up for Lease expenses increasing on the Auto loan portfolio.

The Supplementary leverage ratio is healthy and costing the bank nary a bit as the cost of responsibility continues to be well covered by more efficient profit, even with relative unease and in buying and selling wholesale portfolios with the largest bank in assets (at the top) continuing to make easy meat of market challenges and gaining share again in underwritings and deal making businesses. However IB revenues are unlikely as rosy in the coming 4th Quarter given there is unlikely to be deal closures in the quarter or any return in volumes in equity underwritings.

Commercial Banking is making a comeback as well, with new resurgence in prospects increasing expenses a healthy bit and that does contribute to putting paid to any expected expense efficiencies by investors with the Overall bank efficiency glaringly up past the 60% mark.

Consumer segments were up 15% over Q2 in linked profitability, while firmwide revenues remained subdued at a high $23 Billion mark, the extant consolidation likely to continue redistributing business priorities for 5-6 quarters to come.

Of course the public company presentations of the earnings announcement continue spewing out a lot of unheard rankings to back their business growth but then thats easily available to readers and investors. Headcount is down another 10000 in the year and the continuing expense reductions and increased profitability also took care of an additional $1 Billion in legal costs, contributing to the extant consolidation and the firm’s outlook.

The ROE on Tangible equity is up to 15% and well earned, and net of extraordinary items remains a robust 12% much better than others in the class. MArket book ratios for the industry remain low with the continuing dragging on by Bank of America mostly and the understandable reluctance of the economy in general to move to dependence on mid tier banks and we expect the latter half of 2016 to definitely see a secular uptick in Market to Book ratios led by JP Morgan

JPMQ3 2015

Commercial Banking and Asset Management suffered decreases of 23% and 19% in adjusted earnings but loan growth is robust and reserve build ups are back for the bank to finance its coming growth, a day in the life..

Meanwhile Mortgage Banking was back with a bang, income up 29%

JPM Q3 CCB 2015

And CIB suffered minutely with FICC not playing pretty in light of the yee yaws from a Fed otherwise standing its ground

CIB q3

Investment Banking income for the quarter was another massive $1.5 Billion and Fixed Income MArkets remained dull in commodities and credit as they will going forward except the bump from return in growth in markets like India in the run up to a growth cycle. Equity markets revenue was up 9% and is likely to remain an anchor for overall markets revenue even as after debilitations Fixed Income MArkets revenues are up to close to $3 Billion


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


%d bloggers like this: