The banking giant will try to impress some jittery traders and investors
Today JPMorgan Chase will be the first large financial company to lead the way in this January’s earnings reports. Traders will scrutinise the numbers and words from the board and the CEO Jamie Dimon, as there are many question marks about their performance and future direction.
These quarterly results will be a bit more important than usual as there are a lot of clouds gathering around the largest U.S. bank. The government has recently set high capital requirements for all major banks as a mechanism to put pressure on them to split up different services. Many have voiced their support for this as transparency and risk management will improve, separating deposits from the investment banking and currency trading units. This is believed to lead to a higher valuation for the bank, decoupling the better performers from the laggers.
Opponents are saying that this would immediately place U.S. banks at a disadvantage compared to state-run banks in China and even European banks. Still, most analysts expect the breakup to happen, but its exact details and timeframe will be dissected for any indication of how painful the process might be and how much money it will cost.
As the market has been waiting for development on this and the actual results from the last three months, the stock price has tumbled 5% in January to $58.89, but it’s up around 1% over the last three months.
Their FICC (fixed income, currencies and commodities) business has taken some hits recently performance wise and wasn’t helped by allegations of market manipulation. Last week they became the first bank to settle outside of court and pay about $100 million. This happened after investors complained that traders from large banks such as Bank of America Corp, Barclays Plc, Citigroup Inc. and HSBC among many others, pushed prices in order to improve their own performance and profit, all this at the expense of their clients and investors.
The legal costs for this and previous cases might stack up and dent the overall P/L of the bank. Coupled with the expected fall in revenue, concerns over data security and the ongoing shedding of losing investments, there will be a lot to digest when the statement comes out.
There are some positives for JPMorgan to look ahead to – if the Federal Reserve raises interest rates, the financial sector will be the first to benefit from this, although the exact timing remains to be cleared up. Were this to happen, all other troubles might be washed away and buyers could come in force.
Our next article will be online at 4:00pm GMT – “Before the Event: Intel Expected to Announce Strong Numbers”