Wall Street Giddy About JPMorgan's (JPM) Q2 Results

A number of analysts weighed-in on JPMorgan's (NYSE: JPM) better-than-expected Q2 results today.

The banking-giant reported Q2 EPS of $1.27, $0.06 better than the analyst estimate of $1.21. Revenue for the quarter came in at $26.78 billion versus the consensus estimate of $25.13 billion.

Nomura Glenn Schorr: "IB and comm’l bank were the highlights, though other businesses were pretty good, too. Pre-provision profit rose 8% q/q and was down just 4% y/y, which is better than what people have been braced for. JPM bought back $3.5bn in stock and said, “We will have material excess capital generation over the next several years.” Standout issues were 17bps of NIM decline, a 3% q/q drop in card loans, a 2% drop in other consumer loans and ongoing high mortgage-related expenses. All in, 2Q was good for JPM, considering the backdrop and expectations, and we expect the stock and group to get a lift (seems like a good read-thru for asset managers, brokers, comm’l-sensitive banks and card companies, though we’re not that confident all will perform as well as JPM)." Maintains Buy, $50 price target.

Wells Fargo: "The quarter was somewhat better than we had expected, largely driven by stronger core revenue trends $25.1B versus estimate of $24.9B ($0.04) - focused in card revenue and investment banking. JPM took $1.5B of additional litigation costs ($1.2B by our estimate) plus foreclosure expenses of $1.0B ($0.5B estimate) - offset by $0.8B of private equity gains and $0.8B of securities gains, while $1.0B of foreclosure expense. Reported ROTE of 17% likely to remain among the industry's best, in our view." Maintains Overweight, $51-$54 valuation range target.

Deutsche Bank: The positives: "1) JPM continues to deliver solid/strong results in what seems like a mixed trading environment (at best). 2) Period end loans rose slightly (up 2% annualized) vs. 3/31 driven by growth in all wholesale segments (TSS and AM drove 60% of growth). 3) Mgmt intends to maintain current Basel 3 Tier 1 common of 7.6% as they do not intend to reach targeted levels ahead of schedule. This implies buybacks (which totaled $3.5b this qtr) could be more than expected. The negatives: 1) Net interest margin was down a larger than expected 17bps given declining loan yields (we est a 10bp hit), higher deposit rates (-4bps) and higher short term borrowing costs (-2bps). Average loan yields declined 26bps, driven by card (incl a nearly 50bp decline in the core Chase book). 2) Mortgage and litigation costs (incl foreclosure, servicing, putbacks) totaled another $2.5b. This bring the 6 quarter total to about $20b.
3) Expense mgmt was good in ibank and commercial segments, but heavy
investment spend is still evident in retail, card and asset mgmt." Maintains Buy, $54 price target.

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