It’s that time of the year again!
Earnings season kicks off this week, with JPMorgan releasing its Q4 2020 earnings before the US markets open on Friday 15th January.
Bank stocks have marched into the New Year on a firm note, driven by some progress on the vaccine front and renewed hopes over global economic growth.
JPMorgan which boasts the biggest market capitalization of all US banks is up over 10% year-to-date, after concluding 2020 almost 9% lower.
Market expectations
Sentiment towards the American multinational investment bank will most likely be influenced by the pending earnings report on Friday. According to Bloomberg, the consensus earnings per share estimates stand around $2.62 per share on $28.65 billion in revenues. For a full year, earnings are projected to decline by almost 23.9% to $7.77 per share, while full-year revenues are forecast to hit 120.26 billion - marking a 4% increase from 2019.
Will history repeat itself?
2020 was a rough year for the banking sector as disruptions created by the the coronavirus pandemic hit consumers and businesses.
However, JPMorgan was able to deliver mixed results in Q3 as the company’s trading division saw revenue surge by 30%.
It will be interesting to see whether the US bank will replicate such a feat in the final quarter of 2020 – especially when factoring in the bullish performance in stock markets.
What to look out for
One of the key things to look out for in the earnings report will be the loan-loss provision – something that will indicate whether the lenders have regained confidence after the pandemic drained earnings.
Banks were under the mercy of lower interet rates last year while COVID-19 created extraordinary levels of uncertainty. Such resulted in weak consumer spending which dealt a painful blow to the consumer banking side of the business.
Taking a look at the technicals
Should earnings meet or exceed market expectations, this could boost buying sentiment towards JPMorgan shares in the near term.
Looking at the technical picture, JPMorgan shares are trading above $140 as of writing. There have been consistently higher highs and higher lows on the weekly timeframe while the MACD trade to the upside. A solid weekly close above $140 may open the doors to fresh all-time highs beyond $141.66.
Shifting our focus back to the fundamentals, the medium to longer term outlook may be heavily influenced by the pace of economic recovery which is linked to coronavirus infections and global vaccinations.
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