JP Morgan reported Q2 earnings this morning. Q2 EPS was $4.37 vs. $4 expected. Q2 Revenue was $42.4 billion vs. $38.96 billion expected, a 34% increase YoY. Net interest income (NII) was $21.9 billion, up 44% YoY, or up 38% excluding First Republic. Average deposits were down 6% as customers moved deposits to instruments that generate higher yields.
Overall, it was a great quarter for JPM. They have a very diversified business including investment banking, wealth management and payments on top of the traditional commercial banking business . Higher interest rates actually help JPM generate more revenue as shown in their net interest income while maintaining a healthy balance sheet through diversification. In the earning release, CEO Jamie Dimon made the following comments regarding the US economy:
The U.S. economy continues to be resilient. Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong. That being said, there are still salient risks in the immediate view—many of which I have written about over the past year. Consumers are slowly using up their cash buffers, core inflation has been stubbornly high (increasing the risk that interest rates go higher, and stay higher for longer), quantitative tightening of this scale has never occurred, fiscal deficits are large, and the war in Ukraine continues, which in addition to the huge humanitarian crisis for Ukrainians, has large potential effects on geopolitics and the global economy. While we cannot predict with any certainty how these factors will play out, we are currently managing the Firm to reliably meet the needs of our customers and clients in all environments.
He is signaling consumer spending may slow down but he has been saying that in every earnings release since last year. American consumers love to spend. It’s possible that the student loan payment restart will finally slow them down but I have doubts when the unemployment rate is at 3.6%.