JPMorgan Chase revealed a $2 billion trading loss, triggering an investigation by the government and hearings in Congress. Then the large banks were implicated in a global dust-up over interest rate manipulation.
All this happened amid signs of a slowdown in the U.S. and Chinese economies and a debt crisis in Europe, which won’t help the banks as they report their financial results for April through June.
All eyes will be on JPMorgan on Friday, when it becomes the first bank to report. The trading loss rattled the company’s stock price and hurt both its reputation and that of CEO Jamie Dimon, who is expected to provide an update.
JPMorgan, the country’s largest bank, has scheduled a conference call with analysts to start at 7:30 a.m., two hours before the stock market opens. The call usually happens at 9 a.m. The bank has also doubled the length of the call, to two hours.
Besides its usual presenters, Dimon and chief financial officer Douglas Braunstein, the bank will also have Mike Cavanaugh available to answer questions. Cavanaugh leads a team of senior executives overseeing the loss.
Analysts aren’t expected to give the company a pass.
“We expect a detailed account of what went wrong, what has changed and what is remaining,” says Jason Goldberg, a bank analyst at Barclays Capital, a global investment bank.
Goldberg, like most investors and analysts, has no idea how deep JPMorgan’s loss is. He said it could range from $2 billion to $9 billion. JPMorgan has said it lost the money trying to hedge against financial risk.
JPMorgan’s stock has been pummeled, falling from $40.74 before the announcement of the trading loss on May 10 to about $34.59 on Wednesday.
Other bank stocks have also been dragged down because of uncertainty over how Europe is handling its debt crisis, the recession that has gripped some countries there and economic slowdowns in China and India.
Those worries have led to fewer corporate deals, such as mergers and acquisitions, which require Wall Street help and provide much-needed fees for the big banks.
Companies are also putting their growth strategies on ice, which means they are raising less money on Wall Street to pursue their strategies. That translates to lower fees, too.
Most analysts have recently reduced earnings estimates for banks and also downgraded several stocks. Goldberg cut profit estimates for JPMorgan twice during the quarter, and reduced Bank of America’s by 3 cents and Citigroup’s by 19 cents.