JPMorgan’s profit sinks 42% YoY in fiscal Q1

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Shares of JPMorgan Chase & Co (NYSE: JPM) opened nearly 4.0% down on Wednesday after the Wall Street bank reported lower-than-expected net income for its fiscal first quarter.

Notable figures in JPMorgan’s Q1 earnings report

Net income came in at $8.28 billion in fiscal Q1 or $2.63 per share.  In the same quarter last year, net income stood at $14.3 billion or $4.50 a share.At $30.7 billion, revenue was down about 5.0% on a year-over-year basis.FactSet consensus was for $2.72 of EPS on $30.59 billion in revenue.Investment banking fees tanked 31% while markets revenue was down 3.0%.JPMorgan sees rising demand for commercial banking loans that jumped 2.0% in Q1.

CEO Jamie Dimon blamed inflation and the Ukraine war for the hit to net income. The bank built $902 million of net credit reserve due to a higher probability of downside risk. It benefitted from $5.2 billion of net credit reserve releases. In the earnings press release, CEO Dimon said:

We remain optimistic on the economy, at least for the short term – consumer and business balance sheets as well as consumer spending remain at healthy levels; but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine.

Share repurchase and Stephanie Link’s remarks

According to JPMorgan, its board authorised $30 billion in share repurchase. The bank forecasts a $1.0 billion hit from the Ukraine war over time. Extreme volatility in commodity prices due to the conflict pose another challenge for the big banks.

Despite a 42% hit to profit, Hightower’s Stephanie Link still sees the stock as attractive. On CNBC’s “Squawk Box”, she said:

This stock has massively underperformed since last quarter. I expected a very mixed quarter, but the stock is down 15% year-to-date. It’s trading at 1.5 times book, which is rare for JPMorgan. This stock has traded at north of 2 times book for years.

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