The obvious story from JPMorgan Chase and co (NYSE: JPM) second-quarter earnings is that the bank earned a record $21.2 billion, or $7.70 per share. That’s probably the number that led you here.
Now strip those gains away and JPMorgan still earned $16.9 billion, or $6.14 per share. That’s a quarter most banks would happily celebrate. Yet while everyone else was debating whether the one-off gains inflated earnings, I found myself curious about whether the business underneath those earnings had become stronger…or not.
Bigger Impact Than The Visa Gain
One-off gains naturally dominate earnings headlines because they’re unusual. The problem is they’re also temporary. What tells you far more about a company is whether its core businesses are moving in the same direction, just as it happened this quarter
Consumer & Community Banking delivered another record quarter as card sales volume climbed 10%, loans increased 6%, and average deposits rose 3%. Commercial & Investment Banking wasn’t far behind. Investment banking fees jumped 30%, Markets revenue climbed 35%, while Equity Markets revenue surged an astonishing 86%. Even Asset & Wealth Management continued its remarkable run, ending the quarter with a record $5.1 trillion under management and $6.4 trillion in client assets. In other words, the Visa gain only explains why earnings looked extraordinary. It doesn’t explain why almost every major business inside JPMorgan reached another record.
That’s probably why one line from Jamie Dimon stood out more than the EPS figure itself. “Revenue in each line of business reached a record.”
More Than Just A Traditional Bank
The more I looked at those segment results, the less JPMorgan resembled what most people think of as a bank. Banks traditionally compete for deposits, make loans and earn interest income.
Yeah, JPMorgan still does all of that. But the same company now helps consumers manage their money, finances businesses, advises corporations on mergers, underwrites IPOs, processes payments across the world, manages trillions of dollars for investors and operates one of the largest trading businesses on the planet. Even better, these businesses feed one another.
A corporate client that raises capital today could become a treasury services customer tomorrow. That relationship might eventually create opportunities in payments, investment management or commercial banking. The larger the network becomes, the easier it becomes to deepen existing relationships instead of constantly searching for new ones.
At this point, scale stops being a statistic and starts becoming a moat.
That idea isn’t unique to JPMorgan Chase and co (NYSE: JPM). Look at Switzerland.
Following UBS’s acquisition of Credit Suisse, regulators became increasingly concerned that the combined institution had grown so large relative to the Swiss economy that its failure could threaten the country’s financial system. The conversation stopped being about market share and started becoming about infrastructure.
I’m not suggesting JPMorgan has reached that point in the United States. The American financial system is far larger and far more diversified.
But I do think the direction feels familiar. Every quarter, the company becomes a little more embedded in the financial system and a little harder for competitors to replicate.
Jamie Dimon Still Sees The Risks I Wrote About Last Quarter.
One thing hasn’t changed, Jamie Dimon still isn’t behaving like someone who believes the economy is out of danger.
Even after delivering one of the strongest quarters in JPMorgan’s history, he returned to the same themes that have defined his outlook for well over a year: geopolitical tensions, persistent inflation, elevated asset prices and growing fiscal deficits. Yes, he acknowledged that the U.S. economy has remained resilient. He also made it clear that resilience shouldn’t be mistaken for certainty.
If you read my first-quarter breakdown a few months ago, that won’t come as much of a surprise. I argued then that JPMorgan wasn’t thriving because uncertainty had disappeared, it was thriving despite it. This quarter reinforces that view. Even after delivering record results, Dimon is still preparing the bank for a world he believes remains unusually fragile.
I think that’s an underrated strength because companies often become overconfident after record quarters. Dimon seems to have become more disciplined.
What Does The Technical Picture Look Like?
The technical picture complements the fundamentals rather well.
JPMorgan continues trading above its 20-day, 50-day and 200-day moving averages, keeping both the short- and long-term uptrends firmly intact. More importantly, the stock has held above its breakout near $333 instead of giving those gains back. A sign buyers remain committed rather than simply reacting to an earnings headline. Trading volume of roughly 3.08 million shares was healthy without showing signs of speculative excess, while the absence of heavy selling suggests institutions are still accumulating shares even with the stock sitting near all-time highs. For a company this large, that’s usually a constructive signal.
The Bigger Story May Just Be Beginning.
I’m afraid the $21.2 billion profit will dominate the headlines because it’s easy to remember. Not me. What I’ll remember is that almost every major business inside JPMorgan reached another record at the same time.
That’s much harder to fake than a one-off accounting gain. The Visa transaction made a great quarter look even greater. The operating business suggests something much more durable is happening.
And if that trend continues, I’d stop looking at JPMorgan as simply America’s largest bank. But as one of the world’s most important financial platforms.
