JP Morgan is the world's biggest bank by market capitalisation. But how will the coronavirus impact its Q1 earnings, and the company’s share price?
CEO Jamie Dimon has warned JP Morgan’s [JPM] share price investors that the bank's earnings “will be down meaningfully in 2020”. Last year the bank earned a record-breaking $36.4 billion, but that was in a world without the coronavirus. With Q1 earnings out today, investors will get a first taste of just how hard the world's biggest bank has been hit.
Amount JP Morgan earned last year
What's happening with JP Morgan's share price?
JP Morgan's share price is down over 30% this year. Unsurprisingly most of the losses correlate to the coronavirus outbreak. Still, at least the share price is performing better than rivals Bank of America and Wells Fargo, which have both seen even steeper losses, and are set to report earnings early this week too.
Why should share price investors care?
Dimon has said that the bank will help with any government-led programs to address the economic hardship of the crisis, but won't seek any regulatory help itself. For investors, this is a good sign of the underlying strength in JP Morgan's business model.
Even in an "extremely adverse scenario" the bank is able to lend up to $150 billion according to the bank's submission to the Fed's stress tests.
JP Morgan has already lent $950 million to small businesses affected by the outbreak in the past 60 days. It is also waiving or refunding fees to businesses affected by the outbreak.
The bank is offering those struggling to pay their mortgage a 90-day grace period, while credit card fees have been scrapped. These are all necessary actions to support people in times of hardship. Yet they will affect JP's revenues in the short- to medium-term.
Amount JP Morgan has lent to small businesses in the past 60 days
What are analysts expecting?
Analysts are expecting earnings per share to come in at $2.18, down from the $2.65 seen in the same quarter last year. Revenue is forecast at $29.64 billion, up 4.65%.
One analyst backing JP Morgan is Ari Wald, head of technical analysis at Oppenheimer. Wald said to CNBC’s Trading Nation:.
“We’re specifically recommending JP Morgan over Wells Fargo from an industry-neutral viewpoint. The key here is that JP Morgan has been leading versus its peers and Wells has been lagging. Stick with the relative strength, stick with the leadership and JP Morgan,”
JP Morgan's forecasted revenue
Is JP Morgan’s share price a buy?
JP Morgan carries an average share price target of $107.31. Hitting this would see a 9.2% upside on the current share price.
For those looking to buy on a dip, JP Morgan’s share price could represent a bargain, especially if it does solidify its already indomitable position. Investors will have to stomach some bumpy trading along the way, however.
Dimon, the last of Wall Street's big beasts, is bullish on JP Morgan's future:
“We don’t know exactly what the future will hold — but at a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008,” Dimon said in his annual letter to investors. “Our bank cannot be immune to the effects of this kind of stress.”
“We don’t know exactly what the future will hold — but at a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008” - CEO Jamie Dimon
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.