Daily Brief - JPMorgan Exceeds Expectations

TLDR: JPMorgan kicks off the earnings seasons for banks with a strong start, surpassing analyst expectations with its first-quarter results.

The bank reported earnings of $4.44 per share, significantly higher than the $4.11 per share anticipated by analysts. This marks a notable 6% increase from the previous year, underscoring the bank's operational efficiency and strategic acumen, particularly following its acquisition of First Republic.

Revenue reached $42.55 billion, up 8% year over year and exceeding the expected $41.85 billion. This rise was primarily driven by an increase in interest income, benefiting from higher rates and a growth in loan balances.

The earnings report also touches on the banking industry's challenges, such as the increased costs of attracting deposits and the rising losses on commercial loans, particularly those secured by office buildings and multifamily dwellings. Despite these hurdles, larger banks like JPMorgan are expected to outperform their smaller peers.

Analysts are optimistic about the bank's potential to benefit from continued high interest rates, but CEO Jamie Dimon issued a warning regarding the potential economic turbulence. Specifically, the ongoing geopolitical conflicts, persistent inflationary pressures, and the uncertain effects of extensive quantitative tightening, a factor the financial industry has not fully experienced at this scale.

JPMorgan's shares have risen 15% YTD, substantially outperforming the 3.9% gain of the KBW Bank Index, but fell 3.7% in premarket trading following the earnings report.

Scenario Spotlight: When JPM beats earnings estimates

The chart above shows the historical 1 month response from the SPX, based on the past 16 episodes when JPMorgan has beat EPS expectations by $0.30.

Market Movers: When JPM beats earnings

Here is the historical 1 month response from US Banks post a $0.30 EPS beat by JPMorgan:

1. JPMorgan: 2.10%
2. Goldman Sachs Bank USA: 1.82%
3. Bank Of New York Mellon Corporation: 1.44%
4. US Bancorp: 1.36%
5. Morgan Stanley: 1.13%
6. Bank of America: 1.04%
7. Wells Fargo: 0.91%
8. Citigroup: 0.55%

Asset Spotlight: Bank of America reports on Monday