JP Morgan keeping costs down

JP Morgan will announce its third-quarter numbers on 13 October, and cost-cutting is offsetting the drop in banking income. 

Outside a JPMorgan branch
Source: Bloomberg

JP Morgan is keeping an eyes on its costs, and this has helped the Wall Street titan squeeze out a small rise in second-quarter profits. The legal fees the bank has racked up over the years for various offences have forced it to clamp down on expenditure. Only some of the bank’s businesses are performing well, with the corporate and investment banking unit registering a 9.9% jump in earnings. The financial markets have not been kind to the company, and the asset management operation revealed a 21% fall in profit along with the trading department which also saw earnings fall. In addition, its fixed income business announced a 10% drop in income.

As I previously stated, the CEO Jamie Dimon is keen to improve the reputation of the bank in the wake of the scandals, and keeping costs under control is a task he has managed despite tighter regulation. It is impressive that Mr Dimon has managed to steer the bank to a small rise in second-quarter profits. When the Federal Reserve bank finally increases interest rates, this year or next, it will provide the fixed income markets with some much needed volatility. 

Traders are expecting JP Morgan to announce third-quarter revenue and EPS of $23.7 billion and $1.39 respectively,  compared with second-quarter revenue and EPS of $24.5 billion and $1.4. The bank will announce its full-year results in January 2016, and the market is anticipating revenue of $96.6 billion and EPS of $5.8. These expectations equate to a 1.3% drop in revenue and a no change in EPS. 

Equity analysts are bullish on JP Morgan, and out of the 39 ratings, 29 are buys, and ten are holds. The average target price is $74.41, which is 22% above the current price. Investment banks are not quite as bullish on Bank of America, with 28 buys, nine holds, and three sells from 40 recommendations. The average target price is $19.29, which is 25% about the current price.

The number of short positions being taken out on JP Morgan is now at its highest level in four months.

The share price has been in a strong upward trend, with the $70 level as the target. The $60 mark is providing support and if it is broken then $54 will come into play. 

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