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JPMorgan shares jump after record trading revenue drives stronger-than-expected second quarter profit

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JPMorgan Chase on Tuesday reported second-quarter profit that was bolstered by a 79% surge in trading revenue. 

The bank posted earnings of $4.69 billion, or $1.38 a share, exceeding the $1.04 per share estimate of analysts surveyed by Refinitiv. Revenue of $33 billion exceeded the $30.3 billion estimate. Shares of the New York-based lender jumped 4% in premarket trading. 

“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy,” CEO Jamie Dimon said in the release. “However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm.”

JPMorgan, the biggest U.S. bank by assets, is the first major lender to report earnings for the  period that ended in June. The company is closely watched for clues on how the coronavirus pandemic is impacting banks’ retail and institutional businesses.

The key question investors have is whether the second quarter will represent the nadir for bank profits this year: Big banks are expected to show the largest loan loss provision for any quarter since the financial crisis because of the pandemic, according to analyst Jason Goldberg of Barclays.

The fate of the industry is tied closely to the path of the coronavirus because the unemployment caused by states shutting down their economies impacts the abilities of customers to repay debts.

Dimon said in May that the odds were “pretty good” that the economy would rebound in the second half of the year, driven by the reopening. But that scenario could be threatened by the recent progression of the coronavirus, which has already forced some states to reverse course and shutter businesses again.

A bright spot for the industry has been trading, which has benefited from surging volatility and the Federal Reserve’s unprecedented actions to prop up credit markets. At JPMorgan, the bank’s trading division was headed for a revenue increase of more than 50% compared with the year earlier, co-President Daniel Pinto said in late May.

While bank stocks have rebounded from their March lows, they have underperformed the broader indices, which have been buoyed by the roaring technology sector.

One factor keeping bank stocks down: Low interest rates have pressured net interest margin, a key measure of profitability in the banking sector. The industry’s loan books have also begun to shrink, driven in part by lower credit-card usage and the fear of rising defaults.

This story is developing. Please check back for updates.

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