JPMorgan Earnings: Higher Rates and One-Time Gains Turbocharge Profits but Valuation Demands Caution

Wide-moat-rated JPMorgan continued to earn outsize profits in the second quarter as its balance sheet remains favorably positioned for a high interest rate environment. The bank's headline earnings in the second quarter were positively impacted by a nonrecurring gain related to Visa shares of $7.9 billion, which was partially offset by a donation of $1.0 billion to the bank’s foundation and net investment securities losses of $546 million. The gain related to Visa shares was an accounting gain as the bank converted its Visa Class B-1 shares into Class C shares that are being held at fair value. In our opinion, investors should ignore the noise related to these nonrecurring items.