Mega-bank JPMorgan (NYSE: JPM) reports earnings before the open tomorrow. Given its status as a Dow stock, its success in navigating the crisis, and the attention that the CEO commands, it is sure to get ample attention.
So, what is going to happen?
I expect revenue to be flat-to-down (-5% to 0%), EPS to be up, and ROE to be around 8%.
I think trading revenue will be so-so - Treasury volume should be good, but corporate and MBS looks like it will be weak, though equities should be solid. Banking will be an interesting item - overall activity is down, but I think JPM gained share this quarter.
On the banking side, I figure there will be minimal loan growth, but some positive developments with credit quality. Likewise, I think the company might release some reserves from the credit cards business. Overall, I think the core cards business will be solid, but I think the WaMu business will still look like a basketcase.
I am also wondering whether the company will use some of these reserve releases to offset the cost of the UK banking bonus tax. That would actually be a pretty aggressive move for a conservative company. If they do it, expect to hear some pointed questions about earnings quality.
Last and not least, I still really like this bank. The stock has underperformed the money center banks pretty badly so far this year. I still think Dimon is the best CEO in the game, but his reputation for conservatism may be weighing on shares (investors like aggressive CEOs in economic recoveries; conservative CEOs are only valued when things go bad). Also, the financial reform bill was no big deal, and largely spares JPM from making any hard decisions, so I see that as another weight off the shares.
All in all, I am optimistic on the stock and the quarter.
Disclosure - I own shares of JPM
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