JPMorgan kicks off Wall Street earnings season

• JPMorgan reported Q1 2022 results

• Results were better-than-expected

• Key sales metrics lower compared to Q1 2022

• Credit action slows with higher rates being one of reasons

• $30 billion buyback announced

• Stock trades slightly lower in pre-market

JPMorgan Chase was the first major Wall Street bank to report quarterly financial results for the first quarter of 2022. Report was published today ahead of the opening of the US stock trading session. As JPMorgan is also the biggest US bank in terms of assets, and one of the biggest ones in the world, the report also provides a quick look at the overall state of the US economy in the first quarter of 2022. Let's take a look at the release!

Q1 2022 results

JPMorgan reported quarterly results that in many cases were better-than-expected. However, at the same time they were worse than a year ago. Total adjusted revenue dropped 4.8% YoY to $31.59 billion, driven by a 28% YoY drop in investment banking revenue. Fixed income and equity trading revenue turned out to be much better-than-expected but, again, lower year-over-year. Pick-up in the overall level of interest rates supported net income interest. However, a pick-up in this type of interest was primarily driven by an increase in total deposits. Deteriorating economic outlook for the global economy, resulting from the Russia-Ukraine war or tighter monetary policy, can also be seen in the report with a big pick-up in JPMorgan's provisions for credit losses.

Financial results for Q1 2022 from JPMorgan. Source: JPMorgan, Bloomberg, XTB Research

New $30 billion share buyback

While the overall picture painted by the quarterly report from JPMorgan is not so positive, with key sales metrics being lower year-over-year, it did not discourage the Bank from announcing a new share buyback programme. JPMorgan will launch a $30 billion share buyback, which will begin on May 1, 2022. Nevertheless, the future outlook is not so positive either. Company noted that it took $524 million in losses related to the consequence of the Russian invasion of Ukraine (like widening of funding spreads) and that domestic credit action is weakening. Auto loan origination was down 25% YoY amid vehicle supply shortage. Home loan originations were down 37% YoY amid an increase in interest rates.

A look at the chart

Summing up, results were solid at first glance - key sales metrics were higher than expected. However, on a year-over-year basis the situation does not look too encouraging with most of those key metrics being lower YoY. Company also noted that credit action has slowed with higher rates being one of the factors behind the situation. This is a warning sign as US monetary policy is expected to get much tighter in coming quarters and it may weaken consumers further. On a positive note, announcing a share buyback plan should provide some support for share price.

Taking a look at JPMorgan share price (JPM.US) at daily interval, we can see that the stock has been trading in a downward move since the final quarter of 2021. A recent upward correction failed to push the price above the upper limit of the Overbalance structure and 38.2% retracement of the recent drop ($145 area). Stock erased the majority of gains made during recent correction and moved closer to recent lows in the $128 area. Stock gained in premarket immediately following the release but later erased gains and is now trading around 1% lower compared to yesterday's cash close. It does not change much for the stock when it comes to technical outlook but brings it closer to the aforementioned key support in the $128 zone.

Source: xStation5