JP Morgan's Profits Skyrocket to $14 Billion

Good morning and welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.

The newsletter is divided into two: 

• Green White Green—focused on the Nigerian stock market. 
• Star-Spangled Banner—focused on the US stock market.

Green White Green Last Week 

Potential Dangote food merger

NASCON Allied Industries Plc, which produces salt and is a part of Dangote Industries Limited, is considering merging with two other food companies within the conglomerate. The board of directors of NASCON will discuss this potential combination later this month. 

Regarding a regulatory filing on Thursday, July 13, 2023, the aim is to merge NASCON with Dangote Sugar, the largest sugar refinery in sub-Saharan Africa, and Dangote Rice, forming a single entity. NASCON and Dangote Sugar are both listed on the Lagos Stock Exchange, whereas Dangote Rice is not currently publicly traded.

Access Bank's proposed acquisition of Standard Chartered’s Banking Businesses

Access Holdings PIc, the parent company of Access Bank PIc, announced Access Bank's plans to acquire Standard Chartered controlling stakes in its subsidiaries in Angola, Cameroon, The Gambia, and Sierra Leone, as well as its Consumer, Private & Business Banking (CPBB) operations in Tanzania.

Additionally, Access Bank has entered into a definitive agreement to acquire a majority equity stake in BancABC Tanzania. 

United Capital’s HY 2023 results

United Capital released its results for HY 2023 ended June 30, 2023, last week. 

• Gross earnings: United Capital’s gross earnings grew by 21% year-on-year to ₦11.01 billion in HY 2023 compared to ₦9.11 billion in HY 2022. This was majorly driven by growth in net trading income (138% year-on-year).
• Profit before tax (PBT) and Profit after tax (PAT): Both PBT and PAT grew 6% to ₦5.54 billion and ₦4.69 billion respectively. This was driven by a 20.9% increase in investment income.

Net trading income refers to the total revenue generated by a company from its trading activities after deducting the direct costs associated with those activities. It represents the profit or loss made by a company from its core trading operations.

Investment income refers to the revenue earned by a company from its investments in various financial instruments, such as stocks, bonds, mutual funds, real estate, or other assets, held for the purpose of generating a return. In simple terms, it is the money a company earns from the money it has invested.

Gerugu Power’s HY report for 2023

Gerugu Power released its results for HY 2023 ended June 30, 2023 on July 14, 2023, and these are the results.

• Gross earnings: Geregu Power’s gross earnings by grew by 7.7% year-on-year to N18.1 billion in HY 2023 compared to N16.8 billion in HY 2022. 
• Profit after tax (PAT): PAT dropped by 11.5% to ₦8.05 billion from ₦9.1 billion it recorded in HY 2022. This was driven by 281.25% growth in finance cost which grew from ₦1.6 billion in HY 2022 to ₦6.1 billion during HY 2023 as well as a 266.6% increase of impairment loss. 

An impairment loss refers to a reduction in the value of an asset. It occurs when the estimated future cash flows expected from the asset, such as a piece of equipment, a building, or an investment, are lower than its recorded value on the company's financial statements.

CSCS Q1 2023 results

The Central Securities Clearing System (CSCS) released its results for Q1 2023 ended March 31, 2023, and these are the results.

Central Securities Clearing System Plc (CSCS) operates a computerised depository, clearing, settlement, and delivery system for transactions in securities. The company offers transfer of securities from seller to buyer, payment settlement, and document conversion to electronic format.

• Operating income: Operating income dropped by 11.7% to ₦1.5 billion in Q1 2023 from ₦1.7 billion recorded in Q1 2022. This was driven by a 75.7% decline in the income of other operating activities from ₦50.3 million in Q1 2022 to ₦12.2 million recorded in Q1 2023.
• Profit after tax (PAT): PAT dropped by 24.3% to ₦973.4 million from ₦1.2 billion recorded in Q1 2022, and this was driven by a 47.9% decline in operating profit which dropped from ₦767.1 million in Q1 2022 to ₦399.6 million during Q1 2023.

Green White Green This Week 

Industrial Medical and Gases Nigeria Plc will be holding its AGM this week.

AGM stands for Annual General Meeting. It is a mandatory yearly meeting held by companies, organisations, and associations to discuss important matters with their shareholders or members.

The AGM serves as a platform for key stakeholders to receive updates on the company's performance, review financial statements, elect board members or directors, approve the distribution of dividends, and address any other significant issues.

If you held your shares within the qualification period, expect your dividends after the AGMs. 

Star-Spangled Banner Last Week

America: fueling the future

This year, American crude oil production is set to reach a record high. This is keeping energy prices stable and countering the efforts of countries like Saudi Arabia to raise them. 

OPEC and allies have reduced their output this year but production from other countries are making up for this. 

The United States is contributing significantly as half of the new crude oil comes from there, with companies such as ConocoPhillips and Devon Energy having stellar performances in the first quarter.

Delta Airlines defies gravity

Delta Airlines released their second quarter earnings report and these were the results:

Revenue: $15.58 billion reported vs. $15.46 billion expected 

Earnings per share: $2.68 reported vs. $2.39 expected 

Net income: $2.68 billion 

Delta Airlines is experiencing a successful summer both in the air and in the stock market. The airline reported record revenue and profitability due to high demand and lower fuel costs, and it expects this trend to persist into the third quarter. 

Memorial Day weekend and robust demand between holidays contributed to their impressive second-quarter results. Delta's adjusted earnings per share exceeded expectations, with operating income also reaching a record high. The CEO, Ed Bastian, expressed confidence in the company's performance, stating that consumer demand for air travel remains strong.

Disney considers selling TV assets

Disney CEO Bob Iger is considering selling the company's traditional TV assets due to the challenges posed by the transition to streaming and digital platforms in the media industry.

The company owns a range of TV networks, including the broadcast station ABC and various cable TV channels such as ESPN. He acknowledges that these networks may not be considered core to Disney, but recognises the valuable creativity they have brought to the company.

Inflation report sparks debate

Economists and analysts have different opinions on the latest inflation report, but the market seems to have a positive outlook. In June, the Consumer Price Index (CPI) rose by 3% compared to the same time last year. While in May, it rose by 4%. However, core inflation, which excludes volatile food and energy prices, only grew by 0.2% from the previous month, after consistently rising by 0.4% or more for the past six months. 

This data led to the S&P 500 and Nasdaq reaching their highest levels in over a year. Some experts believe that the decline in inflation is supported by strong foundations and will contribute to the ongoing growth of the stock market. 

However, others caution that the Federal Reserve may not find much comfort in one month of improved data, as the prices of core goods and services remain relatively high.

JP Morgan's profits skyrocketed, amounting to $14 billion

JP Morgan released their 2023 second quarter earnings report and these were the results:

Revenue: $41.31 billion reported vs. $38.84 billion expected 

Earnings per share: $4.75 reported vs. $3.76 expected 

Net income: $14.47 billion 

JPMorgan Chase & Co. made a strong start to the second-quarter bank earnings season, reporting a remarkable 67% increase in profit. 

Here are some things to note from their results: 

• The acquisition of First Republic in May played a significant role, contributing to various segments and generating a $2.7 billion gain. However, it also incurred $1.2 billion in credit costs. 
• Excluding First Republic, JP Morgan's revenue would have risen by 21%, and profit would have been up by 40%. 
• The net interest income reached a record-breaking $21.78 billion, marking the third consecutive quarter of growth. 
• Non-interest income rose by 25% to $19.53 billion. 
• The consumer bank witnessed a substantial 37% increase in revenue, while the corporate and investment bank saw a modest 4% rise. 
• Commercial banking achieved an impressive 49% growth in revenue. 

JPMorgan Chase & Co. is the largest bank in the United States and the world's largest bank by market capitalisation.

N/B: Net interest income represents the difference between the interest earned on loans and investments and interest paid to depositors or lenders. Non-interest income is revenue generated from sources other than interest-related activities, for example, fees and commissions. 

Star-Spangled Banner This Week

Get ready for a bustling week in the world of earnings this week! Big players like Bank of America, Morgan Stanley, Lockheed Martin, Tesla, Netflix, IBM, Goldman Sachs, Johnson & Johnson, United Airlines, and more are gearing up to unveil their quarterly results.

Investors will keep a close eye on Bank of America's earnings on Tuesday, looking for insights into how the Federal Reserve's interest rate hikes have impacted the profitability of major banks. With higher interest rates, Bank of America, America's second-largest bank, is likely to experience a boost in interest margins. Analysts predict a projected net interest income of $14.29 billion for a significant 14% increase compared to the same quarter last year, according to research from Zacks.