To The Moon

$JPMorgan Chase(JPM)$ is expected to report its quarterly report for fiscal Q1 2025 on 11 April 2025 before the market open.

JPM is anticipated to provide a consensus estimate for revenue of $43.03 billion, which would be an increase of 2.6% from same period last year.

The earnings per share would see a 0.22% drop to $4.63 compared to same period last year,

JPMorgan Chase (JPM) Last Positive Earnings Call Saw Share Price Decline By 11.83%

JPM had a positive earnings call on 15 Jan 2025 which saw its share price decline by 11.83%.

The earnings call presented a strong financial performance with record-breaking revenue and net income, robust growth in Investment Banking and Asset & Wealth Management, and improved expense management. However, challenges such as deposit margin compression, loan growth issues, and higher credit costs were noted. Overall, the positive highlights significantly outweigh the lowlights, indicating a strong position and optimism for future growth.

JPMorgan Chase (JPM) Guidance

During the call, JPMorgan Chase provided comprehensive guidance on its 2025 financial outlook, highlighting several key metrics. The firm anticipates 2025 net interest income (NII) excluding Markets to be approximately $90 billion, with firm-wide NII expected to reach around $94 billion. They foresee a modest compression in deposit margins due to lower rates, with the NII trough potentially occurring mid-year before subsequent growth. Additionally, 2025 expenses are projected at about $95 billion, driven by volume and revenue-related expenses and investments in new products and technology.

The firm also reiterated a card net charge-off rate guidance of approximately 3.6% for 2025 and emphasized a robust capital position with a CET1 ratio of 15.7%. Adjustments in capital return strategies, particularly through share buybacks, were discussed to manage excess capital effectively.

Key Factors Influencing Q1 2025 Earnings:

Interest Rates & Net Interest Income (NII)

The firm reported a net income of $14 billion for the quarter and a full-year net income of $54 billion with EPS of $18.22, reflecting strong financial performance across all segments.

If the Federal Reserve maintains elevated rates, NII could remain strong. A rate cut cycle (possible by 2025) might pressure margins but boost loan demand. A sharp decline in rates could compress NII, offsetting higher loan volumes.

Revenue for the quarter was $43.7 billion, up 10% year-on-year, driven by higher asset management fees, investment banking fees, and markets revenue.

NII ex Markets was down $548 million or 2% due to lower rates and associated deposit margin compression, impacting the Banking & Wealth Management revenue.

Loan Growth & Credit Quality

Optimistic Case: Economic resilience drives consumer/corporate borrowing, with low defaults.

Pessimistic Case: Recessionary pressures increase loan-loss provisions (e.g., credit card or commercial real estate defaults).

Global Corporate and Investment Banking loans were down 2% quarter-on-quarter, with commercial real estate loans flat due to paydowns offsetting new originations.

Credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve build of $267 million, driven by higher card revolving balances.

Investment Banking (IB) & Trading

IB Activity: M&A and IPO revival (if market sentiment improves) could boost fees. Investment Banking fees increased by 49% year-on-year, with advisory fees up 41% and underwriting fees significantly up, driven by favorable market conditions.

With positive momentum and a strong pipeline, the firm remains optimistic about the future of its Investment Banking segment.

Trading Revenue: Market volatility (e.g., geopolitical events, election cycles) might lift trading income. The firm reported record long-term net inflows of $234 billion, with AUM reaching $4 trillion and client assets at $5.9 trillion, both up 18% year-on-year.

Expenses & Investments

Ongoing tech/digital investments may raise costs, but efficiency gains could offset them. Regulatory costs (e.g., capital rules) are a wildcard.

Expenses were down $1.7 billion or 7% year-on-year, excluding the prior year's FDIC special assessment, indicating efficient cost management.

Macro Environment

GDP growth, unemployment, and inflation will shape consumer behavior and corporate activity. A "soft landing" in 2024 could set a positive tone for 2025.

Now the tariffs turbulence have caused the recession probability to go up to 80% from 60%. So the overall banking defaults might be an impact to the financial system.

Shareholder Returns

Stock buybacks or dividend hikes could enhance EPS if capital reserves remain robust.

JPMorgan Chase (JPM) Price Target

Based on 18 Wall Street analysts offering 12 month price targets for JPMorgan Chase in the last 3 months. The average price target is $270.31 with a high forecast of $330.00 and a low forecast of $220.00. The average price target represents a 24.64% change from the last price of $216.87.

If we looked at how JPM have performed in the past quarters, it is due to stable NII, mild IB recovery. But with the ongoing tariffs, we might see the management reducing their 2025 guidance.

JPM also announced the probability of a stock market digestion closely related to the US economy experiencing an economic recession has surged to nearly 80%.

This could have an impact on JPM price target.

Technical Analysis - Exponential Moving Average (EMA)

JPM price have reached the lows we encountered in Aug 2024, and with recession probability increase from 60% to 80% in less than one week, this does not bore well.

JPM would need to show accelerating loan demand, trading surge, and cost controls drive double-digit EPS growth.

But recession triggers higher defaults, compressed NII, and weaker capital markets would derail the earnings and also the entire market sentiment on financial stocks.

Summary

JPMorgan’s Q1 2025 earnings will hinge on the economic landscape and policy environment at the time. While the bank’s diversified model and strong balance sheet position it well, unforeseen risks (e.g., geopolitical shocks, regulatory changes) could disrupt projections.

JPM revenue growth might likely driven by NII and fee-based income. We also need to watch JPM Efficiency Ratio which is an indicator of cost management (lower = better).

Another factor to watch would be Provision for Credit Losses, this could signals economic health of loan portfolios.

Appreciate if you could share your thoughts in the comment section whether you think JPM earnings guidance could be marred by recession fears as probability of recession have gone up to 80%.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.