Financial stock under pressure: JPMorgan Chase & Co. (NYSE: JPM)

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JPMorgan Chase & Co. (NYSE: JPM) stock fell over 5.1% on 15th April, 2020 (as of 1:50 pm GMT-4 ; Source: Google finance) after the company posted lower than expected results for the first quarter of FY 20. The company has reported the profit of $2.87 billion, that has plunged 69% from a year earlier, driven mostly by the provisions. The company has set aside $8.29 billion for bad loans, which is the biggest provision in at least a decade and more than double what some analysts expected, as the company is grappling with the effects of the coronavirus pandemic on the economy.

The pandemic has led to sharp declines in profit across three of the bank’s four main divisions, only the asset management business was spared. Another bright spot of the company is its trading division that has posted a 32% increase in revenue to a record $7.2 billion. Bond trading revenue rose to $5 billion, which is a full $1 billion higher than analysts expected, on stronger client activity in government bonds, currencies and emerging markets. Equities trading of $2.2 billion edged out the estimates as well on rising derivatives revenue. The analysts’ were expecting Net Interest Margin to be 2.37%, according to FactSet and in trading revenue, the analysts were projecting fixed income to be $4 billion and equities to be $2.08 billion.

JPM in the first quarter of FY 20 has reported the adjusted earnings per share of 78 cents, missing the analysts’ estimates for the adjusted earnings per share of $1.84, according to Refinitiv. The company had reported 3 percent fall in the adjusted revenue to $29.07 billion in the first quarter of FY 20, missing the analysts’ estimates for revenue of $29.67 billion.

The bank has lowered its full-year outlook for net interest income by $1.5 billion to $55.5 billion. The revenue source accounted for about half the company’s total last year, and in the past has helped counter more volatile results in the trading and investment-banking divisions.

Additionally, for the first quarter, the company had distributed $8.8 billion of capital to shareholders, which includes $6 billion in net share repurchases up to March 15th. Since then, the company has stopped its buybacks. The capital distribution outweighed the earnings for the first quarter, and this coupled with significant RWA growth has resulted in a fall in the CET1 ratio to 11.5%. JPM intends to continue to pay the $0.90 dividend, after getting the Board approval.

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