For all the worry over the financial regulatory reform bill, when JPMorgan Chase (JPM) earnings come out before Thursday's opening bell, the nation's second-biggest bank by assets after Bank of America (BAC) should show strong results from investment banking and lower loan losses.
JPMorgan is the first of the big banks to report, so its results will be closely scrutinized for what they reveal about the health of the credit markets. Investors will also see what they can glean about upcoming earnings reports from the likes of BofA, Citigroup (C) and Wells Fargo (WFC), among other financial services firms.
For the most recent three-month period, analysts on average expect JPMorgan to report earnings of 70 cents a share, well ahead of the 28 cents booked in the prior-year period, according to data from Thomson Reuters. However, the Dow ($INDU) component's revenue is forecast to slip nearly 8% to $25.6 billion.
Higher Credit Quality, Lower Loan Losses
Collins Stewart analyst William Tanona expects JPMorgan to keep benefiting from its strong capital and market positions. "While financial markets appear very fragile at the moment, we believe JPMorgan will continue to gain market share across most of its businesses, and we expect its results will improve materially as the U.S. economy improves," Tanona wrote in a note to clients.
Credit quality will likely show some improvement, while provisions for loan losses should continue to fall for a third consecutive quarter.
Shares in JPMorgan are off more than 3% year-to-date, underperforming the S&P 500 ($INX) by about two percentage points. Analysts' average rating on the shares stands at buy, according to Thomson Reuters. With an average price target of $54, the implied upside in JPMorgan's stock is about 35% in the next 12 months or so.
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