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• JPMorgan Chase reported strong earnings but shares are falling.
• Credit losses and credit reserves are constructing across the banking sector and cutting into the outlook. ‘
• Best case scenario is the banks and JPMorgan are moving lower inside a spread and can hit bottom later in 2023.
• 5 stocks we value more highly than JPMorgan Chase & Co.

Shares of JPMorgan Chase (NYSE:JPM) are moving lower after its report echoed news from across the banking sector. Institutions from Bank of America (NYSE:BAC) to Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) reported solid quarters that include the primary signs of the economic storm Jamie Dimon forecasted last 12 months.

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Those glimmers include a rise in credit losses and increases in capital reserves which have outpaced the consensus targets and left the outlook for 2023 earnings in jeopardy. The takeaway for banking investors is that JPMorgan Chase stays the best-positioned financial institution in America and is able to pay its dividend and resume its share repurchases.

“This robust earnings generation combined with the execution of our capital strategy allowed us to exceed our CET1 goal of 13% one quarter early, and we will resume stock buybacks this quarter, as we deem appropriate,” said chairman and CEO Jamie Dimon within the earnings release.

JPMorgan Exhibits Strength, Prepares For Recession

JPMorgan Chase & Co (NYSE: JPM) had a robust quarter beating on the highest and bottom lines. The corporate generated $34.5 billion in revenue for a gain of 17.9% over last 12 months and beat the consensus by greater than 1 / 4 billion dollars. The strength was driven by Consumer & Community Banking and Industrial Banking, which grew by double-digits.

The strength was offset by a tepid 1% increase in Asset & Wealth Management and a -9% decline in Corporate & Investment Banking. Regarding total loans and deposits, loans are up 0.03 trillion while deposits are down $0.07, a slight change within the balance but not for the higher.

Earnings were also strong despite the rise in credit reserves. The corporate reported $3.56 in adjusted EPS, which is $0.46 higher than expected and up from last 12 months’s $3.03. The bad news is that credit losses increased and credit reserves increased by nearly 50%, and similar increases ought to be expected in the subsequent report.

As for guidance, JPMorgan Chase expects revenue and earnings to be weak relative to the analyst consensus figures, and it could be optimistic.

“The U.S. economy stays strong with consumers still spending excess money and healthy businesses. Nevertheless, we still have no idea the final word effect of the headwinds coming from geopolitical tensions, including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that’s eroding purchasing power and has pushed rates of interest higher, and the unprecedented quantitative tightening.

We remain vigilant and are prepared for whatever happens in order that we will serve our customers, clients and communities worldwide across a broad range of economic environments,” continued Mr. Dimon.

Other Banks Did Not Fare So Well…

The primary have a look at reports from banks like Citigroup, Bank of America and Wells Fargo is that they didn’t fare so well. While Citigroup and Bank of America beat on the highest and bottom lines, they didn’t show the identical strength as JPMorgan. Wells Fargo’s results were mixed, with top-line results falling short and credit losses and capital reserves exceeding consensus.

The Technical Outlook: JPMorgan Lags The Group

Surprisingly, shares of JPMorgan have been lagging behind the financial sector (NYSEARCA:XLF) and the broad market for the reason that pandemic rebound began. On this light, the shares may soon grow to be a sector leader, although the sector itself may come under pressure. Regardless, the best-case scenario for all 3 now that the outcomes are in is for downward movement inside a trading range and for support to verify at or above the October 2022 lows.

Must you invest $1,000 in JPMorgan Chase & Co. right away?

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MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients each day. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to purchase now before the broader market catches on… and JPMorgan Chase & Co. wasn’t on the list.

While JPMorgan Chase & Co. currently has a “Moderate Buy” rating amongst analysts, top-rated analysts imagine these five stocks are higher buys.

Article by Thomas Hughes, MarketBeat