JPMorgan Chase & Co. (JPM) shares were easing rather than rallying before Tuesday's opening bell despite a strong second-quarter earnings report.
A swift 1.5% decline in JPMorgan shares shortly after the print was due in part to tax benefits inflating earnings plus a $500 million reduction in the bank's full-year forecast for net interest income from its previous forecast.
The forecast and some struggles in equities trading were overshadowing solid second-quarter headline numbers for JPMorgan Tuesday morning, much like Citigroup (C) experienced on Monday after posting its results. (Both JPMorgan and Citigroup are holdings of Jim Cramer's Action Alerts PLUS charitable trust.)
JPMorgan said net income in the quarter rose by 16% to $9.65 billion, putting earnings per share at $2.82, or $2.59 excluding the tax benefit. On that basis, the results beat the $2.50 average EPS estimate of Wall Street analysts in a survey by data provider FactSet.
"We had a strong second quarter and first half of 2019, benefiting from our diversified global business model," CEO Jamie Dimon said in a statement. "We continue to see positive momentum with the U.S. consumer -- healthy confidence levels, solid job creation and rising wages -- which are reflected in our Consumer & Community Banking results."
Dimon added that strong growth in credit card sales and increased new deposits add confidence in the bank's consumer segments. However, average total loans were down quarter over quarter.
Investment management was a stickier situation, as JPMorgan reported total markets revenue of $5.4 billion was flat, or down 6% adjusted for impacts of the Tradeweb Markets Inc. (TW) initial public offering (IPO) that also aided Citigroup.
"In the Corporate & Investment Bank, Markets performance was relatively steady on slightly lower client volume, probably due to slightly higher global macroeconomic and geopolitical uncertainties," Dimon said, highlighting a likely focus of pre-market traders.
Investment Banking revenue was $1.8 billion, down 9% due to fee pressures, the bank noted. Treasury Services also fell 4% due to margin compression
Dimon said the "global wallet share" for JPMorgan is down, but the bank still remains ranked No. 1 among its peers.
Given JPMorgan's prominence, many analysts and investors seem comfortable sticking by the bank as it navigates the macroeconomic and geopolitical uncertainties Dimon cited.
"Bottom line-quarter has some noise, but all in just fine," Credit Suisse analyst Susan Roth Katzke told clients. "We see the cost of macro uncertainty/lower interest rates; we also see the benefits of a scaled/diversified/well managed franchise."
Hefty dividend payments and share repurchase programs also should help keep longer-term shareholders aboard.
$JPM Q2 earnings more than 30 cents ahead of expectations, revenue ahead too. Raising quarterly dividend from 80 cents to 90 cents per quarter, new $29 billion+ share buyback.
(long)
— Downtown Josh Brown (@ReformedBroker) July 16, 2019
"We were pleased to announce a meaningful increase to our dividend and repurchases," Dimon said. "While we always prefer to invest capital back into the business, our capital plan provides us with the capacity and flexibility to return excess capital to our shareholders."
A webcast of the bank's conference call is anticipated for 8:30 a.m. and will be available here.
For more shareholder perspective, head to Action Alerts PLUS for Jim Cramer and his team's take.
