JP Morgan earnings preview

Banking giant JP Morgan & Chase reports second-quarter results on Friday before the US stock market opens.

JP Morgan, the biggest bank in the US by assets, is expected to report a quarterly profit of $5.47 billion, or $1.44 expressed as earnings per share, on revenues of $24.84 billion, according to analysts surveyed by Thomson Reuters. In the same quarter in 2012, the company earned $4.63 billion ($1.21 per share) on revenues of $22.89 billion.

Should the forecasts prove to be accurate, this would represent earnings growth of 18%, which would be the fourth quarter in a row in which the company has managed to achieve double-digit earnings growth.

The continued improvement that we have seen in the housing market should benefit JP Morgan’s mortgage-lending business, as well as assets obtained by the company through foreclosure during the downturn.

A strong set of results would help to dim the memory of the London Whale fiasco that cost the company billions of dollars. The volatility seen in the financial markets during June might have caused some trouble to the investment banking arm of the company and the weakness in Europe poses further threats, but this is likely to be outweighed by balance sheet growth and cost containment actions after JP Morgan announced significant reductions in its workforce earlier in the year. It will be interesting to hear what CEO Jamie Dimon has to say about changes to compliance and risk management in the wake of the London Whale scandal.

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