US Stock Earnings Season "First Shot": First Republic Bank Performs Well, JPMorgan Chase Q2 Results Exceed Expectations, YoY EPS Growth of 72% | Financial Report Insights

The earnings season for US stocks has kicked off, with JPMorgan Chase taking the lead by announcing strong results for First Republic Bank.

Benefiting from higher interest rates and the acquisition of First Republic Bank, JPMorgan Chase reported better-than-expected revenue and net profit for the second quarter, with earnings per share increasing by 70% compared to the same period last year. Net interest income also reached a new historical high for the third consecutive time.

Following the release of the data, JPMorgan Chase's stock rose nearly 3% in pre-market trading, bringing its year-to-date gains to over 10%.

In the earnings report, JPMorgan Chase CEO Jamie Dimon stated that "almost all of our businesses delivered continued growth."

The US economy continues to show resilience, with consumers maintaining healthy balance sheets and spending, albeit at a slightly slower pace. While the labor market has softened, job growth remains strong.

However, Dimon warned of "significant risks" in the short term, pointing out factors such as consumers depleting their cash buffers, high inflation, and high interest rates that continue to pose challenges. In an interview with The Economist published this week, Dimon stated that the US could "possibly" enter a recession within the next six months, although he is uncertain about the severity of the recession.

Revenue increased by 34% YoY, net profit increased by 67% YoY, and net interest income reached a new historical high for the third consecutive time

On July 14, before the US stock market opened, JPMorgan Chase released its second-quarter earnings report for 2023.

According to the report, JPMorgan Chase's Q2 net revenue was $41.31 billion, a 34% increase compared to the same period last year, surpassing market expectations of $38.66 billion. Adjusted revenue, excluding First Republic Bank, also increased by 34% YoY to $42.4 billion, surpassing market expectations of $39.34 billion.

Q2 net profit increased by 67% YoY to $14.47 billion, also exceeding market expectations, and excluding First Republic Bank, net profit still grew by 40% YoY.

Diluted earnings per share increased by 72% YoY to $4.75, higher than the market expectation of $3.97 and the first quarter's $4.10. Excluding First Republic Bank, earnings per share still increased by 40% to $4.37, surpassing the first quarter's figure.

Benefiting from higher interest rates, JPMorgan Chase's net interest income in the second quarter increased by 44% YoY to $21.9 billion, marking a new historical high for the third consecutive time. Meanwhile, non-interest income reached $20.5 billion, a 25% increase compared to the same period last year. The provision for credit losses in the second quarter was $2.9 billion, a YoY increase of 163%.

The doubling of the provision was mainly due to the drag from First Republic Bank. Excluding this bank, the provision was only $1.7 billion, roughly the same as the same period last year.

Specifically, the write-offs in Q2 doubled YoY to $1.4 billion; the net provision was $1.5 billion. Excluding First Republic Bank, the net provision was $326 million, lower than the $428 million in the same period last year.

In addition, as of the end of the second quarter, JPMorgan Chase's deposit balance was $2.4 trillion, a YoY decrease of 3% and a MoM increase of 1%. Calculated based on average deposits, JPMorgan Chase's average monthly deposits in the second quarter decreased by 6% YoY.

This is the first financial report released by JPMorgan Chase after taking over First Republic Bank. In May, JPMorgan Chase completed the acquisition of First Republic Bank for $10.6 billion, acquiring all of its deposits and most of its assets, helping it obtain $173 billion in loans and $62 billion in deposits. Previously, First Republic Bank returned $30 billion in deposits that were deposited by Wall Street banks in March.

Overall, First Republic Bank has brought in huge revenue for JPMorgan Chase, but JPMorgan Chase has also paid a high price.

Looking ahead to the full year of 2023, JPMorgan Chase expects net interest income to reach $87 billion, an increase of $6 billion from the forecast released in the first quarter report in April.

CCB's net profit increased by 71% YoY

Behind the strong second-quarter financial report is the rapid growth of consumer and community banking, which has also benefited from the acquisition of First Republic Bank. **

In specific terms, JPMorgan Chase's Consumer and Community Banking (CCB) division recorded a Q2 net income of $17.23 billion, representing a YoY growth of 37%. The net profit reached $5.31 billion, showing an increase of over 71% compared to the previous year.

The Corporate and Investment Bank (CIB) division reported a Q2 net income of $12.52 billion, with a QoQ decrease of 8% but a YoY growth of 4%. The net profit amounted to $4.09 billion, reflecting a 10% YoY increase.

As for the Commercial Banking (CB) division, its Q2 net income reached $3.99 billion, indicating a YoY growth of 49%. However, there was a QoQ decrease of 10% in net profit, which still showed a YoY growth of 22%.

Furthermore, the Asset and Wealth Management business experienced an improvement in revenue compared to the previous quarter, although its profitability declined. The revenue from corporate clients increased nearly threefold.

JPMorgan Chase's workforce surpasses 300,000, equivalent to a city in the United States

It is worth mentioning that JPMorgan Chase has reached a new milestone after acquiring First Republic Bank.

As of the end of the second quarter, JPMorgan Chase's employee count exceeded 300,000, representing a 1% increase from the first quarter of this year and an 8% increase from the same period last year. This number is comparable to the population of one of the largest cities in the United States, such as St. Louis, Missouri.

Additionally, this data does not include the 5,132 personnel related to the acquisition of First Republic Bank's trust banking division, who officially became employees of JPMorgan Chase in early July.