The problems in US banking are growing. (Photo: Freepik, halalstock)
New York – The banks have made good money in the high interest rate phase since 2022 – is this time now over? When the world’s largest financial institution, JP Morgan Chase, presents its figures today the 3rd quarter of 2024 presented, expectations are cautious, and this is not just due to seasonal factors.
After a steep rise since 2022, the share price has recently given way. The all-time high at the end of August (almost 225 US dollars) was followed by a sharp setback. Apparently the markets also reacted to doubts COO Daniel Pintonumber 2 at JP Morgan, in terms of earnings expectations.
One-off effect from Visa shares – problem factors in the 3rd quarter
It saw it in the 2nd quarter quite acceptable: Sales exceeded expectations at $51 billion, and earnings amounted to around $18.1 billion after $14.5 billion in the first quarter of 2024. However, a one-off transaction with Visa shares influenced the overall result .
A number of dampening factors could influence the situation in the third quarter: These include weaker trading revenues due to seasonal factors, stagnating loan growth in view of still high interest rates, correspondingly high interest payments on deposits and higher loan provisions.
Hedging against risks – how strong is the investment area?
Whether the US economy averts a recession has significant implications for the outlook. That the provisions with which the bank protects itself against defaulted loans, in the 2nd quarter increased more sharply than expectedwas a warning signal. The markets are likely to pay attention to this figure today.
And will investment banking remain strong in the third quarter? That is from the perspective of observers not decided. In addition, the bubbling fees for asset management could decline if the financial markets show weakness in the wake of a recession and investors withdraw.
Dimon points to extreme risks – analyst: pressure on margins
“While market valuations and credit spreads appear to reflect a more benign economic outlook, we remain alert to possible tail risks,” said CEO Jamie Dimon on the occasion of the results of the second quarter. The geopolitical situation is particularly dangerous.
“Weak loan growth, higher deposits, increase in loan loss provisions due to higher unemployment rate – all will put pressure on margins and moderately drag down net interest income,” says Stephen Biggar von Argus Research.
Forecast: US banks 2025 and 2026 – JP Morgan office in Munich
However, analysts expect that JP Morgan and other major US banks will increase their profits again as interest rates fall. This is what experts estimate from the financial services provider Keefe, Bruyette & Woods that profits in the banking industry will grow by 8 percent in 2025 and by 12 percent in 2026.
Maybe new markets will also help? JP Morgan is preparing to become more involved in the asset management segment in Germany. The US bank is now opening in Frankfurt an office in Munichto serve wealthy clients in the south. A location in Berlin is also being planned.
Prospects for profit and sales
JP Morgan’s earnings per share are expected to worsen in the third quarter of 2024: 17 analysts estimate around $3.99 marine finanzen.net. Earnings per share were $4.33 in the third quarter of the previous year and $6.13 in the second quarter of 2024.
Experts also expect a decline in sales. The average estimate for the third quarter is around 41.43 billion US dollars, after around 75.94 billion US dollars in the 2nd quarter and 62.16 billion US dollars in the same quarter of the previous year. The fiscal year ends on December 31st.
Disclaimer:
All information is provided with no guarantee that it is complete, correct and up-to-date. The text does not constitute trading recommendations or investment advice.
