JPMorgan’s earnings this week show economic headwinds are hurting sales

  • JPMorgan Chase is expected to release its third-quarter results on Friday before the market opens.
  • In this complex economic environment, results from Wall Street’s financial powerhouse are unlikely to offer a boost to its falling stock.
  • The lender temporarily suspended share buybacks in July to prepare for possible economic headwinds.

As the third-quarter 2022 earnings season kicks off this week, earnings from major U.S. banks could show their revenue from investment banking operations is rapidly drying up, as they benefit from equity market volatility, bonds and commodities, thereby increasing their trading income.

In this complex economic environment, results from the financial powerhouses of Wall Street are unlikely to offer a boost to their falling stocks, which are beset by worries about a weakening economy, slowing lending and the collapse of capital markets.

The is down about 26% since January as the risk of a prolonged recession clouds the outlook for the sector.

Source: Investing.com

In a week filled with revenue from different sectors, I will be focusing particularly on JPMorgan Chase (NYSE:), the largest US lender, to gain insight into the health of US consumers and what lies ahead for the future. ‘general economy. JPM stock has lost more than a third of its value this year.

According to consensus analyst forecasts, JPM will report revenue up about 8% from the same period a year ago. Earnings per share, however, are expected to decline about 20% to $2.88 per share, primarily impacted by a significant decline in investment banking activity.

Uncertain market conditions, which are hampering M&A and IPO operations, have nevertheless been a boon for the bank’s trading desks. Analyst consensus expects JPM’s sales in fixed income, currencies and commodities trading to jump 12%.

Town the researchers also expect JPMorgan to strengthen the net interest income forecast, which was already raised last quarter, as the bank has been more disciplined in deploying cash compared to its peers.

JPM’s diverse business model and leading position in the many areas of banking operations are perhaps the main reasons the lender hasn’t seen a wave of downward revisions to its earnings estimate, according to the data. provided by InvestingPro+.

JPMorgan Earnings Estimates by InvestingPro+

Source: InvestingPro+

Despite the depth of its trading, JPM stock is unlikely to benefit from this week’s results, given economic uncertainty and recession risk keeping investors on the sidelines.

The lender temporarily suspended share buybacks in July to meet higher capital requirements and prepare for possible economic headwinds. CEO Jamie Dimon warned of an economic ‘hurricane’, citing challenges facing the

Federal Reserve

faces as he tries to hold himself back.

During the conference call, I will be keen to learn more about management’s outlook on loan loss reserves and expected credit losses, as well as the lender’s ability to resume share buybacks.

Disclosure: At the time of writing, the author does not own the shares mentioned in this report. The opinions expressed in this article are solely the opinion of the author and should not be taken as investment advice.

Sallie R. Loera