JPMorgan’s Historic Quarter & IBM’s Worst Day Ever

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**Ann Berry** (0:26)
Chipotle, the Mexican food chain, is expanding into Mexico. We have the latest on the company's push across the border. Housing affordability, a new bipartisan law just went into effect. We take a look at the initial market reaction.
And JPMorgan, making US banking history with blockbuster earnings. We survey the results and the surprising contribution that came from one payments OG. For Tuesday, July 14th, it's Brew Markets Daily and I'm Ann Berry.
More market details to come. But first, JPMorgan leading the charge among the financials with the biggest quarterly result in US banking history. Well, the nation's largest bank market cap just under a trillion dollars up at 910 billion. Well, it just posted a blowout quarter with profit jumping more than 40% to hit over $21 billion easily surpassing Wall Street's expectations. Well, the sources of that growth had been well-tracked, for the most part. But there was one little nugget in there that caught our eye, which I'll come back to in just a moment. But we'll start with where that regular way boost came from. Well, to start with, volatile markets, as long as they're going up and to the right, did make for profitable trading windows. JPMorgan hit this quarter's one hard. The bank's equity market's revenue jumped 86% year over year.
And as for investment banking, that also came roaring back. That's as corporate deal making or those merger moments we cover here in the show, picked up pace and capital markets activity, of course, ripped thanks in no small part to the IPO strength that we've been seeing. Plus, consumer and community banking remained resilient. Revenue there up 8%, buoyed by healthy credit trends and steady spending. Well, CEO, Jamie Dimon, described the US consumer as, quote, fine, which may sound like faint praise, but he did say it was supported by a solid labor market and continued business investment, including, by the way, spending tied, of course, to artificial intelligence.
And speaking of AI, Jamie Dimon did comment on how JPMorgan's cost structure has been shifting along with adoption of the technology. The bank cutting jobs in some areas by up to 40% with the use of AI.
So, drum roll, here's the nugget that caught our eye. And that's a real piece of the bank's blockbuster quarter came from a one time accounting gain tied of all things to its stake in Visa. Yes, the payments OG. And here's an interesting lesson coming out of all of this in the merits of long term investing. Many of the country's biggest banks, including JPMorgan, were original owners of Visa back when it operated as a bank owned payments network. Now, when Visa reorganized and went public in 2008, those member banks received equity stakes, and JPMorgan held on to much of that investment ever since. Well, this quarter, the bank finally exchanged some of those shares into a different class, triggering a $4.6 billion revaluation gain that flowed through earnings as a result. Now, a lot of it on paper, but nevertheless, the point is that Visa is itself a public company trading under a ticket, yes, Visa, VISA, on the New York Stock Exchange and with a market cap of over $670 billion.
And the stock is up more than 40% over the past five years. That's as electronic payments continue to replace cash around the world and as cross-border travel and spending remain relatively robust.
Well, Visa earns fees every time consumers and businesses use its payment network. So this is a high margin, cash flow rich and pretty well risk managed business model, which means it's turned those legacy bankstakes like JPMorgan's into enormously valuable holdings over time. Well, come back on Thursday because we're going to be doing a full sweep of bank sector earnings in our fan favourite format that's ticker on a sticker. We'll go through the headlines, but we'll also cut through them and unearth some more nuggets lurking in the likes of Goldman Sachs, Citi, Bank of America and more. So stick with us. Well, coming up in a moment, Congress just passed a historic housing bill. But is it enough to really move the needle on affordability? We're going to break it down.
First, though, a few headlines from the day's trading session. Starting with IBM, what a headline for this one. The company on pace for its worst day in decades. With shares in the tech giant were down 25 percent in early trading, continued down over that 20 percent threshold throughout the day. And that's after the company issued a profit warning, citing the magnitude last quarter of shift in its customers' capex spending. And what the customers were doing was moving away from products like IBM's anticipated new mainframe offering, instead shifting to spend on AI hardware and memory chips.