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Rise in yields provides boost for JPMorgan


MongiIG

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Rising yields should help boost bank profitability, although JPMorgan’s stock price has struggled lately.

bg_jpmorgan_chase_co_1371743.JPGSource: Bloomberg
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Monday 10 January 2022 

While headline indices and many big name stocks have fallen of late, banks are one area that continues to benefit from the talk of an earlier US rate rise.

Now that the US Federal Reserve (Fed) is airing the idea of rate rises in the next few months, yields have begun to pick up, and money is flowing back into banks. While the volatility of the past quarter will not have matched that seen in much of 2020, hitting trading revenues, investment banking and lending activity should see increased profitability as banks charge higher rates.

Commercial and industrial loan activity has picked up, rising 6.3% quarter-on-quarter for the final three months of 2021, which should help bolster bank revenues. At around 10.5 times earnings, the stock remains below the 15.9 for the broader S&P 500. Gains in the stock petered out around $171.50 in October and November, and despite a bounce towards the end of December and into January the price faltered below $169, denting the continued bullish outlook.

However, the stock found support around $150 in September and December, suggesting that any downside for now remains limited unless this level can be breached to the downside.

JPM_100122.pngSource: ProRealTime

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