The Banking and Strategy Initiative

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Bank Earnings Season 3Q2016: JP Morgan breathes as Legal expenses done, Tier I Capital still 12%

While the final target of 12% RoE is still a distance to go, the Bank has recovered its EPS levels of $1.60 this quarter (1.58) Efficiency ratios are down at all three banks reporting today to 57% at Citi and 59% for WFC with 57% in consumer bank and 40% in CIB at JP Morgan.

It’s time finally for a round of boring highly profitable earnings from JP Morgan even as Deutsche Bank and Wells Fargo typify problems with big banks corporate governance. Their $5 B margin call to Lehman in September 2008 notwithstanding, they have managed to come out as the most trusted brand both on Wall Street and in Main Street banking. Mortgage production increased well in the immediate quarter even as Servicing business reported positive revenues , both one suspects contributing to the bank’s big beat on Topline making $25 Bln in revenues for the quarter. corporate and Institutional Banking shone too apart from the bank’s new found love for retail origination as Wells Fargo winds down its lead in originations and starts picking up on JP Morgan’s business model of buying wholesale mortgages to spruce up retail mortgage portfolios. CIB topline was a good $9.5 Billion with both FICC and Equities business doing well.

The Conference call will be updated here in a couple of hours.

The bank has started increasing Loss reserves again two quarters now and its always a good sign for a healthy bank, while the lack of any legal provisioning going forward increased profitability 20% in the CIB sector itself. Lending , both retail and corporate as well as CIB trading lent the most color to the $25.5 Billion in Sales. The bank has also taken some tentative first steps to recover Emerging markets businesses in Asia, India if not the clouded franchise in China


Needless to mention, the bank’s again the Top performer on the street in ROE terms after buybacks and shareholder returns were pared to under $4 Billion in the three quarters to date.

Consumer Banking numbers shine and we will add more here after the conference even though the numbers don’t compare with the performance last year.


The best performance for the Bank came from the Investment Banking franchise that remains on a strong wicket


Wells Fargo reports in the same hour after a year and more of being feted as JP Morgan competitor numero uno and ending in the recent sermon on the Hill.

Update: good to see that the tone of the conference was upbeat in line with the new normal, the bank well equipped to handle any trajectory for the interest rates and looking to add $500 MM in NII from lending (for the flat rate scenario) in 2017



This entry was posted on October 14, 2016 by in Uncategorized.


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