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JPM – Saved By Trading + Sales

Jul. 14, 2020 8:23 AM ETJPMorgan Chase & Co. (JPM)
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  • Massive sales and trading profits enables large provision build.
  • Extremely low expense ratio as expenses flat.
  • 25% average deposit gain as investors held more cash, specifically with JPM.

JP Morgan has knocked it out of the park.

Pre-provision profit increased by 41% from Q1. Driven by a 17% increase in Total Net Revenue with non-interest expense essentially flat.

The 17% increase in Total Net Revenue was due to large increase in sales and trading, known as the Markets segment (up 79%) and Investment Banking (up 54%).

Excluding these segments, the results were relatively flat. 

The increase in Markets revenue has resulted in a very low Overhead Ratio of 51% for the quarter compared to 60% for Q1.

These strong results mean that JPM was able to absorb a credit costs of $10.5 bn, including a reserve build of $8.9bn.

The reserve build was split approximately 50/50 across wholesale and consumer. The consumer build was largely in Card.

JPM now had $34bn of credit reserves on the approximately $1 trillion of loans for an allowance ratio of 3.3%.

JPM reported a net profit of $4.7bn, compared to $9.7bn a year ago.

The other standout was the reported increase of average deposits by 25%.

Analyst's Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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