JPMorgan Q3 preview: Where next for JPMorgan shares?

JPMorgan will be the first US bank to release third quarter earnings, setting the tone for its peers that are scheduled to report later this week. We explain what to expect and consider how JPMorgan shares could react.

When will JPMorgan release Q3 results?

JPMorgan kicks-off the earnings season and will be the first US bank to report results by releasing third quarter earnings before the US markets open on Wednesday October 13.

 

JPMorgan Q3 earnings preview: what to expect from the results

JPMorgan, alongside its peers, has managed to report record profits over the last year as a boom in trading stocks and bonds, a surge in fees from the advising on the flood of IPOs and M&A activity, and the release of billions of dollars’ worth of reserves offset declining demand for loans and the impact record low interest rates has had on net interest income.

But those trends are expected to have started to shift in the third quarter. Fees are forecast to have held up well as companies remain in deal-making mode as they take advantage of the low interest rate environment and cheap valuations to capitalise on the opportunities available as the global economy builds back from the pandemic. However, income from trading is forecast to have declined by around 20% across the industry in the third quarter from the second as markets normalise. Meanwhile, reserves are not expected to flatter the bottom-line as much as in previous quarters considering JPMorgan and the other major banks have already released the majority of cash put aside to cover potentially bad loans during the pandemic.

Investors are hoping the lacklustre demand for loans showed signs of bottoming-out in the quarter and have started to bounce back. Although the pandemic has proven financially challenging for many businesses, the majority of financially-fit firms have actually reduced their debt burden over the past year. The hope is that the economic recovery will have gained enough pace by now to spur on a rise in lending for JPMorgan, the largest lender in the US, as companies look to capitalise on new opportunities. However, the biggest concern is that the anticipated rise in interest rates next year will dampen appetite for new loans, although this will obviously benefit net interest income – the main driver of revenue – for JPMorgan.

The uncertain outlook for US banks, plagued by the anticipated rise in interest rates, comes at a time when they are dealing with a rise in costs. JPMorgan has raised its expense expectations for 2021 several times alongside its peers as they pay more to attract staff and invest serious sums in technology to stave-off competition from more digitally-savvy fintech rivals looking to poach their business. Analysts are expecting costs to outpace revenue growth across the industry during the third quarter which, if it continues, could lead to cost-cutting measures being introduced later this year to allay any concerns from shareholders.

Analysts are expecting JPMorgan’s managed revenue to dip to $29.76 billion from $29.94 billion the year before. Net income attributable to shareholders is expected to edge up to $9.03 billion from $9.02 billion the year before, with diluted EPS forecast to rise to $3.00 from $2.92.

 

Where next for the JPMorgan share price?

After a steep run up in the share price from November, JP Morgan has been trading relatively range bound across most of this year, limited on the downside by $145 and capped on the upper side by $170. The share price has recently broken out of this upside cap trading at all-time highs. 

The RSI is supportive of further upside whilst it remains out of overbought territory.  

Immediate support can be seen at $170 resistance turned support ahead of the 50 sma at $159. A move blow here could negate the near term up trend. 

It would take a move below $152 the 200 sma and $145 the lower band of the channel for the sellers to gain momentum. 

Where next for the JPMorgan share price?

 

How to trade JPMorgan shares

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