JPMorgan Chase (NYSE:JPM) just reported so-so second-quarter results. Although the bank's headline earnings and revenue numbers look solid, there were some disappointing figures and projections, especially given its recent history of outperformance and surpassing expectations.

With that in mind, here's a rundown of the most important highlights of those results and the key takeaways for investors.

Image source: JPMorgan Chase.

The headline numbers

On the surface, it appears that JPMorgan Chase had quite a strong second quarter. The largest U.S. bank by market capitalization produced $29.57 billion in revenue for the quarter, about $670 million more than was expected and 4% more than the same quarter a year ago.

JPMorgan Chase beat estimates on the bottom line as well, earning $2.82 a share and handily beating the $2.50 that analysts had been looking for.

Digging a little deeper

In addition to the strong top- and bottom-line numbers, there were a few other strong points in JPMorgan Chase's second quarter.

For one thing, its profitability is likely to be the best among the big U.S. banks. JPMorgan Chase generated a return on equity of 16% for the quarter -- even though it's early in earnings season, it would be a surprise if this wasn't the best among the "big four" U.S. banks. Its 57% efficiency ratio is also a strong number and is likely to be among the best among its peers.

JPMorgan Chase's fixed-income trading revenue easily beat expectations with $3.69 billion versus the forecast for $3.36 billion. This more than offset the shortfall on the equities trading side, where revenue of $1.73 billion was below the $1.84 billion Wall Street anticipated.

However, this quarter wasn't a stellar one by any definition, and the fact that most of JPMorgan's recent earnings reports were excellent just magnifies this. Here are some of the reasons investors might be disappointed with JPMorgan's latest results:

  • One of the most reliable ways to cause a stock to drop after earnings is to cut guidance, and that appears to be the primary driver of the downside we're seeing here. JPMorgan Chase cut its full-year forecast for net interest income by $500 million from $58 billion to $57.5 billion. To be clear, this isn't exactly a surprise -- long-term interest rates have been falling in 2019, which generally translates to weaker profit margins for banks.
  • Earnings were bolstered by a one-time tax benefit that contributed $0.23 per share to earnings. Even without this, the bank would have beaten estimates, but the numbers would have looked less impressive.
  • Growth was tepid in several key areas of the business. For example, the bank's loan portfolio only grew by 2% over the past year, and this was mainly due to credit cards and higher loans in the wealth management segment. Consumer loans were actually down by 2%.
  • JPMorgan Chase has the No. 1 market share in global investment banking fees so far in 2019. However, investment banking revenue declined by 9% year over year. In fact, revenue dropped in three of the bank's four business segments as compared with the second quarter of 2018 -- only consumer and community banking saw a revenue increase.

The takeaway

In a nutshell, this was a so-so quarter. After quarter after quarter of strong growth and mostly good news, JPMorgan's second quarter gave investors some reasons to smile, but also delivered a few disappointing numbers and projections, which is why the stock's price is reacting negatively.

To be sure, much of the bad news (lower net interest income, falling investment bank revenue, etc.) wasn't exactly surprising, but investors were clearly expecting more than they received.

10 stocks we like better than JPMorgan Chase
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JPMorgan Chase wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 1, 2019

 

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.