Finance

Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

It can be hard to keep the party rolling when everyone is talking about the planning for your wake.

JPMorgan Chase on Wednesday reported results that were, well, frankly not great, but much better than what everyone thought they'd be. They didn't exactly give investors in bank stocks a reason for a blowout celebration, but a few after-work drinks and backslaps wouldn't be out of the question.

Host With the Most
JPMorgan's stock has shown some life recently but is still down for the year
Source: Bloomberg

A little party started in the shares of JPMorgan and other big banks, most of which are still down in double-digit percentages for the year even after sharp rebounds from their lows in February. Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley were all up more than 1 percent in early trading. 

Then the cops arrived.

The Federal Reserve and the Federal Deposit Insurance Corp. announced that JPMorgan, Bank of America, Wells Fargo, State Street and Bank of New York Mellon had flunked their "living wills" to show how they would be resolved in a hypothetical bankruptcy without dragging the rest of the financial system down with them. 

CEO Jamie Dimon said the bank would "do everything" to fix the living will rejection, and so far the issue isn't causing enough concern to break up the party.

Still, it's an issue worth monitoring. The banks have until Oct. 1 to rewrite their plans, and another failure would require them to hold more capital or face other restrictions.

Like any good festivity, the partygoers tried to overlook the negativity. For now, the market is focusing on those not-as-bad-as-expected results and crossing its fingers that pessimism surrounding the other banks had also been exaggerated. Shares in the big banks continued to rise, or at least held onto their gains.  

As everyone knew, JPMorgan's news wasn't all good. It said investment banking revenue dropped 24 percent, to $1.2 billion, as turbulent markets in the first quarter resulted in lower fees from underwriting debt and equities.

Fixed-income markets revenue was down 13 percent and equity markets revenue was 5 percent lower. Still, revenue from the fixed-income segment -- the main problem area that has been keeping Wall Street up at night -- was $3.6 billion, handily beating the average estimate of seven analysts for $3.2 billion and up about $1 billion from the fourth quarter. 

Under the Hood
JPMorgan Chase beat analysts' expectations on many metrics, but its results still show what a difficult quarter it was for Wall Street in many areas
Source: JPMorgan Chase presentation
Note: Comparisons are to first quarter of 2015

The adjusted earnings-per-share number of $1.41 beat estimates by 12 percent and the bank announced that its board had approved $1.9 billion more in share buybacks.

Like any good party, this allows the attendees a chance to forget some of their woes.

Forget for the time being that while the lumpiness in JPMorgan's results wasn't as bad as feared, there were still plenty of lumps, and there's no guarantee that the same lumps won't be worse in the other banks that will report in coming days.

Forget for now how a disappointment from the oil honchos meeting in Doha this week could snuff out the rebound in crude and make everyone start worrying about banks' reserves for losses on loans to energy companies again. (JPMorgan put aside an additional $529 million.)

Forget for now that JPMorgan is returning more than its cost of capital, something that not a lot of banks can brag about these days. Or, for that matter, how the bank's ability to execute during difficult times isn't necessary a reflection of the rest of Wall Street.

This is a party, after all. Planning the wake can wait for another day. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net