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The earnings season is back again with the long list of publicly-traded companies revving up to report their first quarter results over the next few weeks. JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) are set to kick off the season among the banks as they announce their Q1 results before the bell Friday, April 12.

All eyes are on JPMorgan in particular as its diversified business model generally acts as an indicator of what to expect from other banks over the coming weeks. The bank has an enviable record of having beaten earnings expectations 11 times in the last 12 quarters. And while we would love to delve deep into almost every number posted by the bank’s various business divisions, we are especially keen on seeing two figures: its trading business revenues and the size of its outstanding credit card portfolio.

We maintain a $52 price estimate for JPMorgan’s shares, which is about 10% above its current market price.

The Quarter Was Largely Conducive To Trading Operations

Global markets continued to improve over the first quarter of the year with equities rallying around the prospect of a sustained U.S. economic recovery and continued support from the Fed. The low interest rate environment in the country also helped boost demand for debt and other unconventional securities as investors look for higher returns on their investments.

However the European Union’s mismanagement of Cyprus’ bailout towards the end of the period, and the subsequent loss of investor confidence as evident from considerable volatility could have impacted the trading unit’s results.

We’d like to see how well JPMorgan capitalized on the overall positive market conditions – something that can be judged simply by the improvement in the bottom line figures for its investment banking operations. While we expect a healthy growth in sales & trading revenues, we wouldn’t be entirely surprised if the figure remained flat compared to last quarter.

JPMorgan Should Have Added More Credit Card Loans This Time Around

The credit card business is an important source of revenue for JPMorgan Chase, but it has been on a declining trajectory over the recent quarters with the division’s pre-tax income falling from $1.9 billion for Q1 2012 to $1.4 billion for Q4 2012. The reason for this decline can be traced back to a reduction in the bank’s outstanding loan portfolio and an increase in provisions over the period.

The value of outstanding credit card loans fell from $132 billion at the end of 2011 to under $125 billion by Q3 2012, to increase slightly to $128 billion at the end of 2012. At the same time, the bank set aside $2.5 billion in provisions for the division over the second half of 2012, compared to less than $1.5 billion in the first half.

But the steady improvement in the U.S. economy seen over the last quarter in the form of rising home prices and falling unemployment figures should have helped the credit card business in the Q1. We expect decent growth in the loan portfolio as well as income figure for the division.

Disclosure: No positions

Source: JPMorgan Q1 Earnings Preview: What We Are Watching