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NEW YORK (
JPMorgan Chase(JPM - Get Report) will once again kick off the earnings season for banks when it reports third quarter results Thursday morning.
Expectations are low after
the bank's investment banking chief, Jes Staley, warned investors in early September
that markets revenue could post a sequential decline of 30% in the third quarter as market volatility spiked.
JPMorgan Chase CEO Jamie Dimon
Investment banking fees are also likely to plunge by nearly 50% quarter-on-quarter as deal-making and capital raising activity came to a standstill.
The weak guidance from arguably the healthiest bank in the country set off a raft of earnings downgrades for the rest of the sector. Analysts have aggressively slashed their earnings estimates for universal banks such as JPMorgan,
Bank of America(BAC - Get Report) and
Citigroup(C - Get Report) as well as broker-dealers like
Goldman Sachs (GS - Get Report) and
Morgan Stanley(MS - Get Report).
JPMorgan is now expected to post an earnings per share of 96 cents on revenues of $23.73 billion during the third quarter, according to consensus estimates from
Barclays Capital analyst Jason Goldberg expects continued loan loss reserve releases and higher mortgage re-finance activity to "soften the blow" from trading and investment banking divisions.
Considering that a weak operating performance has been well-telegraphed however, investors and analysts will likely focus on the bank's guidance on future performance during the earnings call. Being the first among the big banks to report, the management is likely to be quizzed a range of issues including its loan demand outlook, how it plans to manage the low-interest rate environment, mortgage litigation expenses and of course, its exposure to Europe.
"If [JPM] indicates that loan demand was strong and provides more disclosure and comfort regarding European exposures, the stock could trade higher despite the relatively weak revenue quarter that we expect," KBW analysts said in a report Tuesday.
Here are five top questions for JPMorgan CEO Jamie Dimon.
1.What is the outlook for loan growth?
Dimon has usually sounded an upbeat note in recent management conference calls. With the economic outlook turning even more dour in the third quarter, investors will be looking for more guidance on the economy, demand for loans and how the bank expects to navigate a low interest-rate environment.
"Everyone knows this is a bad quarter, that net interest margins are falling, that the balance sheet is tough to grow. We are going to be looking for guidance on how credit looks, how is the balance sheet looking, how will they manage net interest margins, how much legs does all this stuff have," says FBR Capital analyst Paul Miller.