JPMorgan Chase (JPM) will report third quarter fiscal 2021 earnings results before the opening bell Wednesday. Without question, the bank has established a well-deserved reputation as being one of the best-executing financial firms not only among its peer group, but also one of the best banks in the world.
Driven by ongoing investments in areas like technology, marketing, the bank’s share price has outperformed its competitors over the past six and twelve months. And given its organic expansion initiatives to develop new branches/loan offices, these growth trends are poised to continue. But with the stock trading more than 25% higher than pre-pandemic levels, all of this good news I’ve just listed are known by the market, evidenced by the 34% year to date rise in JPMorgan stock, compared to 17% rise in the S&P 500 index.
More broadly, with the Financial Select Sector SPDR ETF (XLF) now up some 12% in six months, while rising 32% year to date, besting the S&P 500 index in both spans, it would seem any concern the market has had about the state of the economic recovery has vanished. For the sector in general, estimates call for moderate revenue growth for the third quarter, while EPS growth is expected to rise at around more than 50% year over year.
The Wall Street consensus outlook is still bullish, given that the 12-month price target is about 10% above the current level. But investors will still want to know what additional catalysts, whether near term or long term, will drive JPM stock higher, particularly in the low-interest rate environment. That is the answer the market will listen for on Wednesday.
For the three months that ended September, analysts expect the New York-based bank to earn $2.97 per share on revenue of $29.72 billion. This compares to the year-ago quarter when earnings came to $3.09 per share on revenue of $29.15 billion. For the full year, ending in December, earnings are projected to rise 59% year over year to $14.12 per share, while full-year revenue of $123.08 billion would rise 0.10% year over year.
JPMorgan's organic growth initiatives includes new branches and loan offices, among others. The market will assess whether JPMorgan's growth trends can continue. But weakness in its community and consumer banking segment has been an issue, though there were some noticeable improvements in the second quarter. When looking at second quarter results, total revenue of $30.48 billion decline of 7.6% year over year, but still topped Street expectations by $762 million, while quarterly profits came in at $3.78 per share, ahead of estimates by 61 cents.
Q2 average loans fell 3%, with debit and credit card revenue volume rising 45%. Surprisingly, average deposits increased 25% despite lower rate environment. Consumer & Community Banking net revenue of $12.8 billion, rose 3% year over year, while Consumer and Business Banking net revenue of $6.02 billion rose 15%. However, Investment banking revenue, which was a bright spot in Q1, declined 19% in Q2, Fixed income trading revenue suffered a 44% plunge.
Can these trends continue in Q3? The bank’s community and lending segment will also be an area of focus. With moderate improvement, JPMorgan can maintain its well-deserved reputation for execution. But how will the stock respond?
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.