A month has gone by since the last earnings report for JPMorgan Chase & Co. (JPM). Shares have lost about 6.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is JPMorgan Chase & Co. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

JPMorgan Q1 Earnings Miss on Reserve Build, Stalled M&A

Lower markets revenues, reserve build and decline in IB fees affected JPMorgan’s first-quarter 2022 earnings of $2.63 per share, which missed the Zacks Consensus Estimate of $2.73. The reported quarter’s results included net credit reserve build and losses in Credit Adjustments & Other.
 
Equity markets revenues and fixed income markets revenues fell 7% and 1%, respectively, on a year-over-year basis. Thus, total markets revenues of $8.8 billion declined 3%. This is lower than management’s expectation of a 10% decrease for the quarter.

The performance of IB business was disappointing. Equity and debt underwriting fees tanked 78% and 20%, respectively. On the other hand, advisory fees were a saving grace, rising 18%. Yet, IB fees decreased 31% from the prior-year quarter.

Also, mortgage fees and related income plunged 35% to $460 million. During the quarter, operating expenses recorded an increase.

During the first quarter, the company reported net credit reserve build of $902 million, given the “higher probabilities of downside risks.” The CEO Jamie Dimon said in a statement, “We remain optimistic on the economy, at least for the short term – consumer and business balance sheets as well as consumer spending remain at healthy levels – but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine.”

While relatively lower rates continued to hurt the bank’s interest income, it was more than offset by a rise in loan balance (up 6% year over year). Further, Commercial Banking average loan balances were up 2% year over year.

Among other positives, Asset & Wealth Management average loan balances grew 14% from the year-ago quarter. Debit and credit card sales volume increased 21%, reflecting the steadily improving consumer confidence and economic outlook.

The overall performance of JPMorgan’s business segments, in terms of net income generation, was disappointing. All segments recorded a decrease in net income on a year-over-year basis. So, net income plunged 42% from the prior-year quarter to $8.3 billion.

Revenues Down, Costs Rise

Net revenues as reported were $30.7 billion, down 5% year over year. The top line beat the Zacks Consensus Estimate of $30.5 billion.

Net interest income grew 8% year over year to $13.9 billion.

Non-interest income declined 13% to $16.8 billion, primarily due to a fall in mortgage banking and related fees, card fees, IB fees and principal transactions.

Non-interest expenses (on managed basis) were $19.2 billion, up 2%. This upswing was mainly due to a rise in compensation expenses and marketing costs.

Credit Quality: A Mixed Bag

Provision for credit losses was $1.5 billion against a net benefit of $4.2 million in the prior-year quarter. However, net charge-offs plunged 45% to $582 million. As of Mar 31, 2022, non-performing assets were $8.6 billion, down 16% from Mar 31, 2021 level.

Solid Capital Position

Tier 1 capital ratio (estimated) was 13.7% at the first quarter-end, down from 15% in the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 11.9%, down from 13.1%. Total capital ratio was 15.4% (estimated) compared with 17.2% as of Mar 31, 2021.

Book value per share was $86.16 as of Mar 31, 2022, compared with $82.31 in the corresponding period of 2021. Tangible book value per common share was $69.58 at the end of March, up from $66.56.

Share Repurchase Update

During the quarter, JPMorgan repurchased shares worth $2.5 billion.

2022 Outlook

Management expects managed NII (excluding CIB Markets NII) to be $53 billion, up $8.5 billion from the 2021 level. The rise is largely expected get support from expectations of six interest rate hikes this year and balance sheet growth, partly offset by “the roll-off of PPP”

Adjusted operating expenses are projected to be nearly $77 billion, up 8% year over year. The increase is largely due to “revenue and volume-related expenses”, technology upgrade costs and the impact of expenses related to the strategic acquisitions.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, JPMorgan Chase & Co. has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, JPMorgan Chase & Co. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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