JPMorgan Chase kicked off the fourth-quarter earnings season for big banks early Friday. Wall Street expects weaker earnings as recession concerns weigh on the market, while growth in net interest income is projected to accelerate. JPM stock rose on Friday afternoon after edging slightly lower premarket following the report.
JPMorgan earnings fell the past four quarters leading up to Friday's results. The New York-based bank has seen an uptick in revenue for its last two quarters, rebounding after four consecutive declines. In Q3, earnings fell 16.6% to $3.12 per share while revenue rose 10% to $32.7 billion.
Deutsche Bank analyst Matt O'Connor sees new lows on the horizon for U.S. bank stocks. Bank earnings may be peaking, O'Connor wrote in a research note last Friday, and banks could see downside risk from bulking up reserves ahead of a possible recession. O'Connor downgraded JPM stock to hold and lowered the price target to 145 from 150.
Still, with the Federal Reserve's rate hike cycle still climbing, interest rates are for now expected to continue rising, which can help bank performance.
A Jan. 3 note from Barclays analyst Jason Goldberg projected that bank stocks will likely show resilience, despite recession concerns. He believes net interest margins for large-cap banks will peak in 2023 while loan growth slows and loan losses increase. Goldberg says lower-end consumer and commercial real estate will see the fastest loan losses.
The Barclays analyst raised his price target on JPM stock to 189 from 162 — almost 37% above where the stock closed Tuesday — and maintained the overweight rating on the shares.
JPMorgan Earnings
Expectations: Analysts predicted JPMorgan earnings would slide 6.3% to $3.12 per share on 17.5% revenue growth to $34.3 billion, according to FactSet. Wall Street saw adjusted net income at $3.08 per share, falling from $3.33 last year.
Results: JPMorgan earnings rose 7% to $3.57 per share and reported revenue grew 18% to $34.5 billion.
Net interest income spiked 48% to $20.3 billion, exceeding forecasts of 39% growth to $19.1 billion and marking the fifth straight quarterly gain. Consumer banking revenue increased 29% to $15.8 billion and just beat estimates of $15.6 billion. Meanwhile, JPMorgan's consumer and investment banking revenue dipped 9% to $10.5 billion, coming in lower than the expected $10.8 billion.
JPM Stock
JPM stock rose 2.5% Friday after initially dipping 3% premarket following the results. Shares are up almost 37% the last three months but down nearly 13% since the beginning of 2022.
JPM stock eclipsed the 138.76 buy point for its flat base on Wednesday, setting the stock up for what could be its first breakout in more than a year. The current buy zone extends to 145.69, or 5% above the buy point. The base sits atop support at the stock's 50-day/10-week moving average.
However, investors should remain cautious when considering new positions so close to earnings.
You can follow Harrison Miller for more news and stock updates on Twitter @IBD_Harrison.
