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JPMorgan share price lags behind Morgan Stanley’s ahead of earnings

The JPMorgan [JPM] share price has outperformed the S&P 500 so far in 2021, with the stock closing 12 July 26.7% up in the year-to-date at $158. The index lagged the JPMorgan share price with gains of 16.7% in the same period. The JPMorgan share price made a swift start, gaining 21.5% since the turn of the year to close 24 February at $151.49.

Following a short-lived pullback, the JPMorgan share price continued to consolidate, rising to close at a high of $165.49 on 4 June. However, a rapid fall saw the share price lose 11.1% in two weeks to close 18 June at $147.07. A rally from there has since lost momentum, leaving the JPMorgan share price with gains of 68.8% over the past 12 months (through 12 July).

Meanwhile, the Morgan Stanley [MS] share price has outperformed JPMorgan’s, with gains of 36.7% in the year to 12 July and 105.2% over the preceding 12 months.


JPMorgan's YTD share price rise


Will cost-cutting pay dividends?

JPMorgan’s second-quarter 2021 earnings report is expected before markets open on 13 July. Zacks Equity Research consensus estimate forecasts revenues of $29.9bn and earnings per share of $1.38. While these estimates would leave JPMorgan’s revenue 9.4% down on the equivalent quarter last year, earnings will have more than doubled in the same period.

Conversely, Zacks Equity Research expects Morgan Stanley’s revenues to increase by 3.03% year-over-year to $13.82bn but predicts a fall in earnings to $1.64. Morgan Stanley is expected to announce its latest earnings report before markets open on 15 July.


JPMorgan's estimated Q2 revenue


In October 2020, JPMorgan began cutting hundreds of jobs beginning with 80 positions in its consumer banking division. Morgan Stanley, however, insisted in March 2020 that the bank would not let any staff go during the coronavirus pandemic. The change in each bank’s revenues and profitability over the past 12 months seems to reflect the impact of JPMorgan’s stringent cost-cutting measures.

JPMorgan is set to increase its dividend payments to $1 per share, up from the current level of $0.90, from the third quarter of this year in response to positive results of the Federal Reserve’s (Fed’s) stress testing of major US banks. When the dividend increase was announced on 28 June, the JPMorgan share price increased by 0.18%.

Morgan Stanley has also unveiled plans to double its common stock dividend to $0.70. The bank also announced plans to repurchase $12bn shares over the next four quarters, having already repurchased $2.1bn worth in the previous quarter. JPMorgan announced an indefinite $30bn share repurchase programme in December 2020, with the JPMorgan share price gaining 5.3% in after-hours trading following the announcement.


Morgan Stanley's estimated Q2 revenue


Regional gains

JPMorgan is the second-largest component of the iShares U.S. Financials ETF [IYF] as of 9 July, with 6.85% of the fund’s weighting. As of 12 July, the fund has gained 24.3% in the year to date and 51.6% in the past 12 months. The JPMorgan share price has outperformed the fund in the same periods of time. Meanwhile, Morgan Stanley is the fund’s eighth holding with 1.96% of its value.

JPMorgan’s exposure is greater still in the iShares U.S. Financial Services ETF [IYG], which has gained 25.8% in the year to date and 59% over the past 12 months (through 12 July). JPMorgan is the fund’s top holding as of 9 July, with an 11.5% weighting. Morgan Stanley is seventh on the list, with 3.28% of its weight.

However, the share price performance of the two major US banks over the period has lagged behind that of their smaller, regional counterparts. The iShares U.S. Regional Banks ETF [IAT], which tracks small and mid-size regional US banking stocks, is up 28.8% in the year to date (through 12 July). In the past 12-month period, it has gained 85.1%, beating the increase in the JPMorgan share price over the same period by more than 16.3%.

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