JPMorgan Chase (NYSE:JPM) reported a 28% decrease in profits for the second quarter on Thursday, while Morgan Stanley (NYSE:MS) reported a 29% decline in profits. Two of the major banks in the United States failed to meet analyst expectations, adding to the market’s abundance of reasons to fear the future. Nonetheless, a few of the underlying indicators imply optimism and may provide a clearer picture of the economy at now.
No Real Weakness
In contrast to analysts’ expectations of $2.89 per share, JPMorgan’s (NYSE:JPM) profit dropped to $8.65 billion or $2.76 per share, but the $428 million that the bank placed aside for a rainy day reserve to cover potential future loan losses was the main cause of the decline. Even while the fees charged on the bank’s Chase credit cards decreased, consumer spending on items like travel and nights out on the town increased by 15% from the first quarter and by 21% over the previous year. However, consumers are making fewer large purchases. At JP Morgan, mortgage originations were down 44% from the previous year, as were vehicle loan and lease originations.
Collectively, these indicators point to a rise in cost-consciousness among households, but not enough to generate substantial economic ripple effects:
- JPMorgan’s CFO, Jeremy Barnum, stated in a conference call with the media, “We’ve looked a lot very carefully into our actual data”. “There is essentially no evidence of actual weakness” he added.
- After years of robust bull market deal-making, IPOs and debt and equity issuance will both reach a plateau in 2022, creating a weakness for the banking sector. Morgan Stanley’s Investment banking revenue, which includes fees from mergers and acquisitions, decreased by 55% compared to JPMorgan’s.
Both banks’ traders were able to profit from fluctuating stock prices and interest rates, so market volatility has been beneficial. In comparison to a year before, JPMorgan’s trading fees on Wall Street increased by 15%, while Morgan Stanley’s trading revenues increased by 21%.
What Made the Difference: A unusual occurrence also diminished Morgan Stanley’s (NYSE:MS) $2.5 billion profit, which at $1.39 per share fell shy of analysts’ $1.56 estimates. The bank set aside $200 million to resolve an investigation by US regulators investigating the use of unauthorized personal devices by its personnel. Last year, while under a similar investigation, JPMorgan Chase (NYSE:JPM) agreed to pay the same sum to authorities.
When it Rains: At the time of writing, BlackRock, Citigroup, U.S. Bancorp, and Wells Fargo report their quarterly results. On Monday, Bank of America and Goldman Sachs will follow. So anticipate lots more to worry about or not worry about.
About Morgan Stanley
Morgan Stanley (NYSE:MS) is a multinational American investment management and financial services firm based at 1585 Broadway in Midtown Manhattan, New York City. The company’s clientele includes organizations, governments, institutions, and individuals. It has offices in over 41 countries and more than 75,000 employees. Morgan Stanley (NYSE:MS) rated 61st on the Fortune 500 list of the top U.S. companies by total revenue in 2021.
The original Morgan Stanley (NYSE:MS) was founded on September 16, 1935 by J.P. Morgan & Co. partners Henry Sturgis Morgan (grandson of J.P. Morgan), Harold Stanley, and others in response to the Glass–Steagall Act, which mandated the separation of commercial and investment banking companies. The company has a 24% market share ($1.1 billion) in public offerings and private placements in its first year of operation.
About JPMorgan
JPMorgan Chase (NYSE:JPM) is a global leader in financial services, providing solutions to the most influential firms, governments, and organizations in over 100 countries. As stated in early 2018, JPMorgan Chase (NYSE:JPM) will invest $1.75 billion in global charitable causes by 2023. Utilizing our various resources, including access to cash, economies of scale, global reach, and specialized knowledge, they also organize voluntary service events for our employees in their local communities.
Featured Image: Megapixl @Nicoelnino
