As a rebounding economy wrestles with rising prices caused by inflation, bank JPMorgan (NYSE: JPM) approved a $30 billion share buyback program. This announcement comes on the heels of a freshly declared earnings report for Q1 2022.
Earnings reported were weaker than expected as the bank set aside $1 billion to cover potential losses linked with inflation worries and the ongoing war in Ukraine. Earnings ended up at $8.3 billion or $2.36 per share, which is down 42.7% from the same period last year.
Jamie Dimon, the bank’s CEO, warned that the Russia-Ukraine conflict would reduce the bank’s earnings; he also touched on rate hikes from the Federal Reserve (FED).
Dimon stated earlier today (April 13):
“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 issue, and the war in Ukraine.”
Stock performance and sentiment
The stock hasn’t been performing that well since the start of 2022, staying in a descending channel stubbornly trading below the 20-50-200 day Simple Moving Averages. The stock pared back almost all the gains it made during 2021.
In the last month, JPM has been trading between $128.73 – and $143.93, which is quite broad, and it is currently trading near the lows of this range. Due to the price movement being a little bit too volatile to find a nice entry and exit point, the stock does not offer a high-quality setup at the moment.
Analysts rate the stock a moderate buy, predicting an average price for the next 12-months to be at $171.19, which would represent an increase of 30.14% from the correct $131.54 price. More bullish analysts see the stock at $200 in the next 12-months.
Heartbeat of the economy
Worries of a flattening yield curve, a measure of the gap between rates on short-term and government debt, have punished bank stocks lately. A flatter curve means that investors are more worried about the economy, while the rates can affect the rates on mortgages and costs of borrowing in general.
This trend with the curve is not good news for bank profitability where banks borrow short and lend long. A slowdown in mergers, IPO’s and debt issuance can also affect another profitable segment of the banks, the investment banking fees.
The trajectory of rising costs will be an important aspect to track to better gauge investors’ sentiment around the economy and possibly bank performance.
JP Morgan is the biggest U.S. bank and is the first one to report earnings. Other banks will follow suit, so tracking their earnings can give a complete picture of the investing environment.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.