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JPM Reports Blowout Earnings On $5.2BN Reserve Release; Stock Drops On Warning Of “Challenged” Loan Demand

JPM Reports Blowout Earnings On $5.2BN Reserve Release; Stock Drops On Warning Of "Challenged" Loan Demand

During a Q1 that was marked by steadily climbing interest rates and fresh record highs across equity markets, JP Morgan kicked off…

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JPM Reports Blowout Earnings On $5.2BN Reserve Release; Stock Drops On Warning Of "Challenged" Loan Demand

During a Q1 that was marked by steadily climbing interest rates and fresh record highs across equity markets, JP Morgan kicked off bank earnings season by beating on its expectations, but not by a wide enough margin to impress investors, who pushed the stock lower in reaction.

First, a quick look at what the bank reported at the top line:

  • Adjusted EPS $4.50, smashing expectations of $3.09, and more than 5x higher than the 78c reported a year ago
  • Adjusted revenue $33.12 billion, +14% y/y, also smashing expectations of $30.42 billion.

And yet, this blowout report apparently was not enough for investors, who quickly pushed JPM stock lower. A big reason - one quarter after US banks raised loan loss reserves by amounts similar to the global financial crisis, they are now releasing reserves en masse, and JPM certainly did so, with $5.2BN of the $14.3BN in net income the result of reserve releases, compared to just $1.1BN in estimated releases. Net of Q1 releases, the bank's total reserves in Q1 were $25.6BN, almost exactly where it was one year ago, and which according to Jamie Dimon "are appropriate and prudent, all things considered.”

In other words, ex reserve releases, EPS would have been just below $9BN, and the resulting EPS would be below $3.00.

Including the releases, however, meant that JPM reported another record quarterly net income... again.

To be sure, it wasn't "just" reserve releases, and in the quarter, the bank did report stellar corporate and investment banking results:

  • Investment banking revenue $2.85 billion, smashing the $2.46 billion estimate and 222% higher than the $886 million Y/Y. The bank said that IB fees were up 57%, "reflecting higher fees across products", while YoY comparisons benefited from an "$820mm bridge book markdown in 1Q20." Remarkably, equity underwriting was up 219% on the back of the SPAC boom, which beat the nearly 152% estimate from analysts.
  • FICC sales & trading revenue $5.76 billion, +15% y/y, and blowing out the $5.02 billion estimate; the outperformance here was predominantly driven by Securitized Products and Credit, largely offset by Rates and Currencies & Emerging Markets

  • Equities sales & trading revenue $3.29 billion, +47% y/y, also blowing out the estimate $2.32 billion; the profit was driven by strong performance across products

A summary breakdown of the Q1 Ibanking results is below:

The problem, of course, is that with volatility fading and the SPAC boom ending, the bank is unlikely to repeat this stellar corporate and markets performance in the second quarter.

On the expense side, the bank reported expenses of $7.1B, up 19% YoY, "predominantly driven by higher revenue-related compensation partially offset by lower legal expense."

Some other data from the quarter:

  • Net yield on interest-earning assets 1.69% vs. 2.37% y/y, estimate 1.81%
  • Net charge-offs $1.06 billion, estimate $1.37 billion
  • Basel III common equity Tier 1 ratio 13.1%
  • Return on equity +23% vs. +4% y/y
  • Assets under management $2.8 trillion
  • Compensation expenses $10.60 billion, +19% y/y, estimate $10.12 billion
  • Managed net interest income $13.00 billion, -11% y/y, estimate $13.31 billion

On the commercial bank side, JPM reported that total loans fell 4% year on year to $1 trillion. The biggest drop there came from credit card loans, which fell 14% year on year. Notably, small business lending plunged by 50%, according to the release as the bank was no longer in the government-backstopped PPP business. The bank raised $8 billion of credit for U.S. small businesses in the first quarter of 2020, an amount that fell to $4 billion this most recent quarter.

However, thanks to QE, as loans declined deposits rose, and JPMorgan continued to attract a huge sum of new deposits which is how QE materializes on bank balance sheets. JPM's deposits are now up 24% year on year to $2.3 trillion. Combined with the drop in lending the bank’s loans-to-deposits ratio fell to 44%. It was at 57% this time last year.

The bank's outlook was unchanged:

  • Expects FY 2021 FY net interest income to be $55BN, Est. $55.12B
  • Expects FY 2021 adjusted expense of $70BN.

Commenting on the quarter, Jamie Dimon sounded an optimistic note about the economy in his quote, echoing his comments in his annual letter that he expects there to be a post-pandemic boom. The CEO said that “consumer spending in our businesses has returned to pre-pandemic levels, up 14% versus the first quarter of 2019. We are also seeing good momentum in T&E with spend up more than 50% in March versus February. Home Lending originations were very strong, up 40%, with almost 75% of consumer mortgage applications completed digitally, but we expect this to slow with the recent rise in interest rates. Loan demand remained challenged as Card outstandings remain lower despite spend recovering to pre-COVID levels. Deposits were up 32% and investments were up 44%. In the Corporate & Investment Bank, we maintained our wallet share, Global IB fees were up 57% and Commercial Banking generated IB revenue over $1 billion. Corporate clients continued to access capital markets for liquidity and repay revolvers. In Asset & Wealth Management, continued strong investment performance, growth in new products and advisor hiring led to net inflows of $48 billion into long-term products. Also, AWM has seen strong and steady loan demand primarily to support business growth and mortgages.”

Summarizing the macro environment, Dimon said that "with all of the stimulus spending, potential infrastructure spending, continued Quantitative Easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth. This growth can benefit all Americans, particularly those who suffered the most during this pandemic. If all of the government programs are spent wisely and efficiently, focusing on actual outcomes, the benefits will be more widely shared, economic growth will be more sustainable and future problems, like inflation and too much debt, will be reduced.”

Good luck with the "spent wisely" part - you are, after all, talking about government.

In any case, it appears that as we previewed a few days ago, the earnings season has already been priced to perfection and despite the blockbuster beat, albeit largely on the back of reserve releases, the stocks is actually lower by about a dollar in premarkt, last trading at $153, down 0.75%. According to Bloomberg, investors may also be focusing on the warnings the bank’s provided: Home loan originations are expected to slow with the recent rise in interest rates and Dimon says that loan demand remains "challenged." As investors prepare for today's conference call, the question is does Dimon he expect that challenged loan demand to persist? Or can that engine start roaring again soon?

The full investor presentation is below:

Tyler Durden Wed, 04/14/2021 - 06:54

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COVID-19 Infection Increases Risk Of Autoimmune Diseases By Up To 30 Percent: Study

COVID-19 Infection Increases Risk Of Autoimmune Diseases By Up To 30 Percent: Study

Authored by George Citroner via The Epoch Times (emphasis…

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March 20, 2024

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COVID-19 Infection Increases Risk Of Autoimmune Diseases By Up To 30 Percent: Study

Authored by George Citroner via The Epoch Times (emphasis ours),

(Juan Gaertner/Shutterstock)

Surviving COVID-19 may leave you at heightened risk of developing debilitating autoimmune diseases like rheumatoid arthritis and lupus for up to a year after infection, according to new research.

However, the study also found that vaccinating against the virus could significantly lower your chances of developing these potentially life-altering inflammatory conditions.

COVID-19 Infection Severity Plays a Big Role

The study, published in Annals of Internal Medicine, analyzed national claims data from over 10 million Korean and 12 million Japanese patients aged 20 and above diagnosed with COVID-19 between January 2020 and December 2021. The dominant strains were the wild-type virus and the delta variant during this period. COVID-19 patients were compared with matched flu patients and uninfected controls.

A little less than 4 percent of Korean participants had a history of COVID-19, and about 1 percent had a history of flu. Among Japanese participants, about 8 percent had been infected with COVID-19, and slightly less than 1 percent had been infected with flu.

Researchers found that COVID-19 patients had a 25 percent to 30 percent increased risk of new-onset autoimmune rheumatic diseases (AIRDs) 30 days after infection compared to uninfected individuals.

More severe COVID-19 was linked to a greater risk of new-onset, untreated, and treated AIRD, with both wild-type and delta variants associated with AIRD risk. The risk of new-onset AIRD seemed to decline over time and trailed off after the first year.

COVID-19 infection is associated with numerous autoimmune disorders, Dr. Jacob Teitelbaum, a board-certified internist specializing in the treatment of chronic fatigue syndrome and fibromyalgia, told The Epoch Times. “For example, there is a marked increase in hyperthyroidism after COVID caused by autoimmune attack on the thyroid glands,” he said. With the immune system already on high alert from the virus and “having trouble shutting down,” it is not surprising that the body’s own tissues will often become collateral damage, he noted.

“So this new study simply confirms what is already expected,” Dr. Teitelbaum added.

Vaccines Reduce Autoimmune Risk, but Only in Mild Cases

The findings also suggest that COVID-19 vaccination reduced the rate of AIRDs among patients who received one to two or more doses. This reduced risk was observed whether the vaccine used was mRNA-based or viral-vector type.

However, the reduced AIRD risk was only linked to patients with mild COVID-19 infection, not those with moderate or severe infection.

This is noteworthy, given growing evidence suggesting that COVID-19 vaccination could cause new-onset autoimmune diseases, including autoimmune glomerulonephritis, autoimmune hepatitis, and AIRDs.

AIRDs Increase Risk of Other Severe Conditions

AIRDs involve inflammation of the joints or connective tissue caused by attacks from the body’s immune system. These diseases can affect multiple organs and systems, leading to a wide range of symptoms and complications.

Some common AIRDs include:

  • Rheumatoid arthritis (RA): RA is a chronic autoimmune disorder that primarily affects joints, causing inflammation, pain, stiffness, and swelling. Untreated RA can lead to joint damage, deformities, disability, cardiovascular disease, osteoporosis, and lung problems over time.
  • Systemic lupus erythematosus (SLE): SLE is a systemic autoimmune disease affecting various organs and tissues like skin, joints, kidneys, heart, lungs, and brain. Symptoms may include fatigue, joint pain, skin rashes, fever, and organ inflammation. Complications involve kidney damage, cardiovascular disease, neurological disorders, and increased infection susceptibility.
  • Ankylosing spondylitis (AS): AS primarily affects the spine and sacroiliac joints, causing inflammation and eventual vertebrae fusion, leading to spinal stiffness and limited mobility. It can also impact other joints, eyes, and organs. Complications may include spinal deformities, eye inflammation, and cardiovascular problems.
  • Psoriatic arthritis (PsA): PsA is an autoimmune condition with joint inflammation and skin lesions (psoriasis). In addition to joint pain, swelling, and stiffness, PsA can cause nail changes, eye inflammation, and tendon inflammation (enthesitis). Complications could include diabetes and high blood pressure.
  • Sjögren’s syndrome: Sjögren’s syndrome primarily affects moisture-producing glands, leading to dry eyes and mouth. However, it can also cause systemic issues like joint pain, fatigue, and organ involvement of the kidneys, lungs, or nervous system. It increases the risk of lymphoma and other autoimmune diseases.
  • Systemic sclerosis (scleroderma): Scleroderma is characterized by excessive collagen production, causing thickening and hardening of skin and connective tissues. It can also affect internal organs like the lungs, heart, kidneys, and gastrointestinal tract. Complications may include gastrointestinal bleeding, lung and heart problems, and bowel obstruction.

Inexpensive Treatment Available but Ignored: Expert

AIRDs significantly impact quality of life and require long-term management with medications, physical therapy, and lifestyle modifications. Regular monitoring and comprehensive care from health care professionals are essential for managing these conditions and minimizing health risks.

However, effective yet inexpensive treatments for these conditions are largely ignored, Dr. Teitelbaum said.

Low-dose naltrexone, costing less than $1 a day, has been shown to help chronic pain or autoimmune conditions, he added. Additionally, highly absorbed curcumin and Boswellia serrata, found in curcumin, were proven as effective as Celebrex in treating rheumatic arthritis in a head-to-head study, he noted.

Tyler Durden Wed, 03/20/2024 - 02:45

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IVI starts technology transfer to Biological E. Limited to manufacture oral cholera vaccine for India and global markets

  Credit: IVI IVI will complete the technology transfer by 2025 Oral Cholera Vaccine to be manufactured by Biological E. Limited for India and international…

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March 20, 2024

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Credit: IVI

  • IVI will complete the technology transfer by 2025
  • Oral Cholera Vaccine to be manufactured by Biological E. Limited for India and international markets

 

March 20, 2024, SEOUL, Republic of Korea and HYDERABAD, India — The International Vaccine Institute (IVI), an international organization with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health, today announced that it has commenced a technology transfer of simplified Oral Cholera Vaccine (OCV-S) to Biological E. Limited (BE), a leading India-based Vaccines and Pharmaceutical Company.

 

Following the signing of a technology license agreement in November last year, IVI has begun providing the technical information, know-how, and materials to produce OCV-S at BE facilities and will continue to support necessary clinical development and regulatory approvals. IVI and BE entered this partnership during an unprecedented surge of cholera outbreaks worldwide and aim to increase the volume of low-cost cholera vaccine in India as well as the global public market.

 

IVI will complete the technology transfer by 2025 and the oral cholera vaccine will be manufactured for India and international markets by Biological E. Limited.

 

Dr. Jerome Kim, Director General of IVI, said: “In an era of heightened risk of poverty-associated infectious diseases such as cholera, the world needs a sustainable source of high-quality, affordable vaccines and committed manufacturers to supply them. We are pleased to partner with Biological E., a company with a proven history of making life-saving vaccines accessible globally, to address this supply gap and protect communities from this deadly, though preventable, disease.”

 

Ms. Mahima Datla, Managing Director, Biological E. Limited, said: “We are glad to be in collaboration with IVI for the manufacture of simplified Oral Cholera Vaccine. Our efforts are aimed to not only combat the disease but to also be part of a sustained legacy of innovation, collaboration, and health stewardship. Together with IVI, we are happy to be shaping a healthier and more resilient future by making this vaccine accessible globally.”

 

This technology transfer and licensing agreement is the sixth of its kind for IVI, transferring such technology to manufacturers in India, the Republic of Korea, Bangladesh, and South Africa. All these partnerships have led to or seek to achieve, pre-qualification (PQ) from the World Health Organization, a designation that enables global agencies such as UNICEF to procure the vaccine for the global market. BE already has 9 vaccines with WHO PQ in its portfolio, and IVI and BE will pursue WHO PQ for OCV-S as well, following national licensure in India.

 

Dr. Julia Lynch, Director of IVI’s Cholera Program, said: “The cholera situation is dire, and the availability and use of oral cholera vaccine is an essential part of a multifaceted approach to cholera control and prevention, especially as outbreaks increase and the global vaccine supply remains strained. With more manufacturers like BE entering the market, the future supply situation looks strong. IVI remains committed to ensuring the availability of the oral cholera vaccine and to developing new and improved vaccines that are equally safe, effective, and affordable and made around the world, for the world.”

 

OCV-S is a simplified formulation of OCV with the potential to lower production costs while increasing production capacity for current and aspiring OCV manufacturers. IVI’s development of OCV-S and ongoing technology transfers are part of an institutional strategy to confront cholera with 3 main goals: 1) Ensure supply of OCV 2) Improve cholera vaccines 3) Support OCV use and introduction. The Bill & Melinda Gates Foundation has been supporting IVI’s cholera program since 2000 and is funding this latest technology transfer to BE.

 

###

 

About the International Vaccine Institute (IVI)

The International Vaccine Institute (IVI) is a non-profit international organization established in 1997 at the initiative of the United Nations Development Programme with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health.

IVI’s current portfolio includes vaccines at all stages of pre-clinical and clinical development for infectious diseases that disproportionately affect low- and middle-income countries, such as cholera, typhoid, chikungunya, shigella, salmonella, schistosomiasis, hepatitis E, HPV, COVID-19, and more. IVI developed the world’s first low-cost oral cholera vaccine, pre-qualified by the World Health Organization (WHO), and developed a new-generation typhoid conjugate vaccine that also achieved WHO prequalification in early 2024.

IVI is headquartered in Seoul, Republic of Korea with a Europe Regional Office in Sweden, an Africa Regional Office in Rwanda, a Country Office in Austria, and a Country and Project Office in Kenya. IVI additionally co-founded the Hong Kong Jockey Club Global Health Institute in Hong Kong and hosts Collaborating Centers in Ghana, Ethiopia, and Madagascar. 39 countries and the WHO are members of IVI, and the governments of the Republic of Korea, Sweden, India, Finland, and Thailand provide state funding. For more information, please visit https://www.ivi.int.

 

 

About Biological E. Limited

Biological E. Limited (BE), a Hyderabad-based Pharmaceuticals & Biologics Company founded in 1953, is the first private sector biological products company in India and the first pharmaceutical company in Southern India. BE develops, manufactures and supplies vaccines and therapeutics. BE supplies its vaccines to more than 130 countries and its therapeutic products are sold in India, the USA and Europe. BE currently has 8 WHO-prequalified vaccines and 10 USFDA approved Generic Injectables in its portfolio. Recently, BE has received Emergency Use Listing (EUL) from the WHO for CORBEVAX®, the COVID-19 vaccine. Recently, DCGI has approved BE’S 14-Valent Pneumococcal Conjugate vaccine.

In recent years, BE has embarked on new initiatives for organizational expansion such as developing specialty injectable products for global markets as a means to manufacture APIs sustainably and developing novel vaccines for the global market.

Please follow us on Facebook, LinkedIn and Twitter

 

 

MEDIA CONTACTS

IVI

Aerie Em, Global Communications & Advocacy Manager
+82 2 881 1386 | aerie.em@ivi.int

 

Biological E. Limited

K. Vijay Amruth Raj
Email: Vijay.Kammari@biologicale.com
www.biologicale.com/news

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Apartment permits are back to recession lows. Will mortgage rates follow?

If housing leads us into a recession in the near future, that means mortgage rates have stayed too high for too long.

Published

6 hours ago

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March 19, 2024

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In Tuesday’s report, the 5-unit housing permits data hit the same levels we saw in the COVID-19 recession. Once the backlog of apartments is finished, those jobs will be at risk, which traditionally means mortgage rates would fall soon after, as they have in previous economic cycles.

However, this is happening while single-family permits are still rising as the rate of builder buy-downs and the backlog of single-family homes push single-family permits and starts higher. It is a tale of two markets — something I brought up on CNBC earlier this year to explain why this trend matters with housing starts data because the two marketplaces are heading in opposite directions.

The question is: Will the uptick in single-family permits keep mortgage rates higher than usual? As long as jobless claims stay low, the falling 5-unit apartment permit data might not lead to lower mortgage rates as it has in previous cycles.

From Census: Building Permits: Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,518,000. This is 1.9 percent above the revised January rate of 1,489,000 and 2.4 percent above the February 2023 rate of 1,482,000.

When people say housing leads us in and out of a recession, it is a valid premise and that is why people carefully track housing permits. However, this housing cycle has been unique. Unfortunately, many people who have tracked this housing cycle are still stuck on 2008, believing that what happened during COVID-19 was rampant demand speculation that would lead to a massive supply of homes once home sales crashed. This would mean the builders couldn’t sell more new homes or have housing permits rise.

Housing permits, starts and new home sales were falling for a while, and in 2022, the data looked recessionary. However, new home sales were never near the 2005 peak, and the builders found a workable bottom in sales by paying down mortgage rates to boost demand. The first level of job loss recessionary data has been averted for now. Below is the chart of the building permits.



On the other hand, the apartment boom and bust has already happened. Permits are already back to the levels of the COVID-19 recession and have legs to move lower. Traditionally, when this data line gets this negative, a recession isn’t far off. But, as you can see in the chart below, there’s a big gap between the housing permit data for single-family and five units. Looking at this chart, the recession would only happen after single-family and 5-unit permits fall together, not when we have a gap like we see today.

From Census: Housing completions: Privately‐owned housing completions in February were at a seasonally adjusted annual rate of 1,729,000.

As we can see in the chart below, we had a solid month of housing completions. This was driven by 5-unit completions, which have been in the works for a while now. Also, this month’s report show a weather impact as progress in building was held up due to bad weather. However, the good news is that more supply of rental units will mean the fight against rent inflation will be positive as more supply is the best way to deal with inflation. In time, that is also good news for mortgage rates.



Housing Starts: Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,521,000. This is 10.7 percent (±14.2 percent)* above the revised January estimate of 1,374,000 and is 5.9 percent (±10.0 percent)* above the February 2023 rate of 1,436,000.

Housing starts data beat to the upside, but the real story is that the marketplace has diverged into two different directions. The apartment boom is over and permits are heading below the COVID-19 recession, but as long as the builders can keep rates low enough to sell more new homes, single-family permits and starts can slowly move forward.

If we lose the single-family marketplace, expect the chart below to look like it always does before a recession — meaning residential construction workers lose their jobs. For now, the apartment construction workers are at the most risk once they finish the backlog of apartments under construction.

Overall, the housing starts beat to the upside. Still, the report’s internals show a marketplace with early recessionary data lines, which traditionally mean mortgage rates should go lower soon. If housing leads us into a recession in the near future, that means mortgage rates have stayed too high for too long and restrictive policy by the Fed created a recession as we have seen in previous economic cycles.

The builders have been paying down rates to keep construction workers employed, but if rates go higher, it will get more and more challenging to do this because not all builders have the capacity to buy down rates. Last year, we saw what 8% mortgage rates did to new home sales; they dropped before rates fell. So, this is something to keep track of, especially with a critical Federal Reserve meeting this week.

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