What Happened

JPMorgan announced earnings on January 14 and delivered significant beats on EPS and revenue. Its net interest margin was lower than last year, but higher than expected, showing an ability to cope with low interest rate conditions after the Fed's rate cuts last year. This shows that JPMorgan can continue to sustain a sound foundation with their basic banking business even as they grow their more variable investment banking and trading revenue.

(Below is Investopedia's original earnings preview, published 1/7/20)

What To Look For

JPMorgan Chase & Co. (JPM) is the biggest U.S. bank by market value, at more than $426 billion, and as such is a bellwether of the financial services industry more broadly. JPMorgan Chase reports earnings at 6:45 a.m. on January 14, 2020 for Q4 2019. During the trailing 12-month period, JPMorgan Chase has outperformed the market overall, returning 39.2% as compared to 25.8% for the S&P 500 Index.

Much of JPMorgan Chase's stock gains over the past year have accrued since the most recently quarterly earnings report was released in mid-October. Now, investors will be watching to see if the bank maintained its net interest margin through the final quarter of 2019, signaling an ability to lend at higher rates than it provided for deposits. Analysts expect JPMorgan Chase to report EPS GAAP of $2.37 for Q4 2019, an improvement of nearly 20% year-over-year (YOY).

JPMorgan 12-Month Total Return Vs. S&P 500
Source: TradingView.

In recent quarters, JPMorgan Chase has reported gains in revenue, rising 4.4% YOY in Q1 2019 and by 3.9% in Q2 2019. The most recent quarter, Q3 2019 saw a 7.6% gain YOY. EPS growth has been even more pronounced: JPMorgan Chase saw diluted earnings grow by 14.5% in Q3 2019. The stock price has generally trended upward alongside these positive revenue and earnings figures for the past several quarters.

JPM Key Metrics
  Estimate for Q4 2019 Q4 2018 Q4 2017
Earnings Per Share ($) 2.37 1.98 1.07
Revenue ($B) 27.6 26.1 24.5
Net Interest Margin (%) 2.34 2.54 2.42
JPMorgan Chase Earnings for Q4 2019

For a bank like JPMorgan Chase, net interest margin is a key indicator of overall performance. This ratio measures the ability of a company to invest its funds as compared with the expenses required for the same investments. Net interest margin shows whether a financial institution is able to lend at higher rates than it provides for deposits and is akin to gross profit margin for non-financial companies; it can be thought of as the amount of money the bank is earning in interest on loans as compared against the amount it is paying in interest on loans. For banks like JPMorgan Chase, net interest margin is particularly important at periods of low interest rates.

On a quarterly basis over the past two years, JPMorgan Chase has seen its net interest margin remain fairly steady between the range of 2.41% (Q3 2019) and 2.56% (Q1 2019). Analysts are expecting a slight drop for Q4 2019, with a consensus estimate of 2.34% in the upcoming earnings release. Nonetheless, over the past three years net interest margin for JPMorgan Chase has been slowly trending upward. For comparison, the figure was 2.22% for Q4 2016. If JPMorgan Chase is able to meet analyst expectations and show significant growth in EPS as well as steady growth to revenue for Q4 2019, that may offset a slight decline in net interest margin for the quarter.