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JPMorgan (JPM) CEO Expects Economic Rebound to Start in Q3

Zacks Equity Research

At a virtual conference hosted by Deutsche Bank DB yesterday, JPMorgan’s JPM CEO Jamie Dimon voiced his opinion on the current economic situation. Dimon believes that there are “pretty good odds” of a fast rebound from the coronavirus-induced economic slowdown starting third-quarter 2020.

Per a Bloomberg report, Dimon stated, “You could see a fairly rapid recovery. The government has been pretty responsive, large companies have the wherewithal, hopefully we’re keeping the small ones alive.”

Dimon is of the opinion that consumers are in a better position now than they were during the last economic crisis. Consumers have started spending more on their debit cards, which is expected to bring this year’s total spending level in line with that of last year.

In fact, the bank’s trading business continues to witness strong growth. Just like the first quarter, trading revenues are likely to witness growth this quarter as well.

However, Dimon also believes that a prolonged downturn is still possible.

He expects that JPMorgan will boost its credit reserves again in the second quarter by an amount “roughly equivalent” to the $7 billion it added in the first quarter in order to protect itself from a potential wave of loan defaults.

In fact, he thinks that most banks will increase cash reserves because of expectations of the unemployment rate in the United States to rise to almost 18% by June.

In first-quarter 2020, JPMorgan’s results were hurt because of the provisions built, owing to deterioration in the macro-economic backdrop, losses related to funding spread widening on derivatives and bridge book markdowns. Moreover, the company witnessed a decline in revenues along with higher expenses.

Our Take

The coronavirus-induced concerns are expected to continue to hamper business activities. Thus, JPMorgan’s loan growth will likely be muted in the near term. Nevertheless, its focus on the credit card business will aid financials.

Shares of the company have lost 31.3% so far this year compared with the industry’s decline of 36%.

Currently, JPMorgan carries a Zacks Rank #3 (Hold).

A couple of stocks from the finance space worth a look are mentioned below.

Tradeweb Markets Inc. TW has witnessed an upward earnings estimate revision of 6.6% for 2020 over the past 60 days. This Zacks Rank #1 (Strong Buy) stock has gained 36.5% so far this year.

GAIN Capital Holdings, Inc.’s GCAP current-year earnings estimates increased significantly in 60 days’ time. Further, the company’s shares have appreciated 58.2% year to date. At present, it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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JPMorgan Chase Co. (JPM) : Free Stock Analysis Report
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