ii view: JP Morgan beats forecasts but cautions on trade war
Run by the highly regarded Jamie Dimon and with a long track record of dividend growth. We assess prospects for this major US bank.
11th April 2025 15:44
by Keith Bowman from interactive investor
First-quarter results to the 31 March
- Revenue up 8% to $46 billion
- Earnings per share up 14% to $5.07
- Quarterly dividend of $1.40 per share, up from $1.25 paid in Q4
Chief executive Jamie Dimon said:
“The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and “trade wars,” ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility.
“As always, we hope for the best but prepare the firm for a wide range of scenarios.”
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ii round-up:
JPMorgan Chase & Co (NYSE:JPM) today flagged the potential negative impact of a trade war on the US economy as the banking giant reported better-than-expected first-quarter revenue and profit.
High volumes of equity trading helped drive up revenues for the three months to late March by 8% year-over-year to $46 billion. That fuelled growth in earnings of 14% to $5.07 per share, beating Wall Street forecasts of $4.61 per share.
Against a backdrop of sizeable market volatility on tariff concerns, shares in the Dow Jones company rose 2% in US trading. The bank’s shares came into these latest results down 5% year-to-date, similar to China exposed rival HSBC Holdings (LSE:HSBA). The Dow index itself is down almost 7% in 2025.
Headquartered in New York, JP Morgan employs around 300,000 people globally. Revenues at its commercial and investment banking division climbed 12% from Q1 2024 to $19.6 billion. Equity related revenue rose 48% to $3.8 billion, driven by a strong performance for derivatives amid elevated levels of market volatility. Overall divisional profitability climbed 5% to $6.94 billion.
Revenue at the consumer and community banking division improved 4% year-over-year to $18.3 billion. Higher balances for the credit card business helped counter lower net interest income for banking given lower customer deposit levels. Divisional profitability fell 8% to $4.4 billion.
Assets under management at its wealth division climbed 15% to $4.1 trillion, fed by ongoing net inflows and higher market levels
In March, JP Morgan declared a first quarter dividend of $1.40 per share, up from $1.15 paid in the prior fourth quarter. Second-quarter results are scheduled for 15 July.
ii view:
Formed via the merger of JP Morgan and Chase Manhattan in 2000, the group today competes against rivals including Wells Fargo & Co (NYSE:WFC), The Goldman Sachs Group Inc (NYSE:GS) and Bank of America Corp (NYSE:BAC). Geographically, the US generated its biggest slice of revenue in 2024 at 79%. That was followed by the combined Europe, Middle East and Africa regions at 13%, with Latin America and the Caribbean the balance of 2%.
For investors, a potential easing in customer activity under the cloud of trade war uncertainty now persists. Higher wages have remained a factor in pushing up group costs. An estimated price-to-net value of around 1.8 times is comfortably above many rivals, suggesting the shares are not obviously cheap, while plans for an eventual replacement of CEO Jamie Dimon have yet to be confirmed.
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To the upside, the benefits of a diversified business model have regularly seen strong conditions for one countering challenges at another. JP Morgan has no direct business in China, the USA’s main trade war opponent. The bank's finances remain robust given a capital cushion, or CET1 ratio of over 15%, while a forecast dividend yield of around 2.4% is not to be ignored.
For now, and while trade war uncertainty offers increased room for caution, this giant of the US banking industry looks to remain worthy of its place in many diversified investor portfolios.
Positives:
- Business diversity
- Robust balance sheet
Negatives:
- Economic outlook uncertainty
- Heightened costs
The average rating of stock market analysts:
Buy
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