JPMorgan Chase on Friday topped analysts’ estimates for third-quarter profit and revenue because the bank generated more interest income than expected, while credit costs were lower than anticipated.
Here’s what the corporate reported:
- Earnings: $4.33 a share
- Revenue: $40.69 billion, vs. $39.63 billion LSEG estimate
The bank said profit surged 35% to $13.15 billion, or $4.33 a share, from a yr earlier. That per-share figure includes 17 cents in securities losses and 22 cents in legal expenses. It wasn’t immediately clear which items were included in LSEG’s $3.96 a share profit estimate.
Revenue climbed 21% to $40.69 billion, helped by the stronger-than-expected net interest income. That measure surged 30% to $22.9 billion, exceeding analysts’ expectations by roughly $600 million. At the identical time, credit provisioning of $1.38 billion got here in far lower than the $2.39 billion estimate.
JPMorgan’s retail banking division saw profit surge 36% to $5.9 billion, fueled by higher net interest income and the acquisition of First Republic. Its corporate and investment bank saw profit slip 12% to $3.1 billion on declines in trading and advisory revenue.
JPMorgan shares gained 1.5% on Friday following the report.
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JPMorgan shares have outperformed a regional bank ETF this yr.
Uncertain times
Dimon warned that while American consumers and businesses were healthy, households were spending down money balances and that tight labor markets and “extremely high government debt levels” meant that rates of interest may climb even farther from here.
“The war in Ukraine compounded by last week’s attacks on Israel can have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” Dimon said. “This may occasionally be essentially the most dangerous time the world has seen in a long time. While we hope for one of the best, we prepare the firm for a broad range of outcomes.”
The quarterly report comes after a period of uncertainty for U.S. banks.
Bank stocks plunged last month after the Federal Reserve signaled it will keep rates of interest higher for longer than expected to fight inflation amid unexpectedly robust economic growth. The ten-year Treasury yield, a key figure for long-term rates, jumped 74 basis points within the third quarter. One basis point equals one-hundredth of a percentage point.
Higher rates hit banks in several ways. The industry has been forced to pay up for deposits as customers shift holdings into higher-yielding instruments like money market funds. Rising yields mean the bonds owned by banks fall in value, creating unrealized losses that pressure capital levels. And better borrowing costs tamp down demand for mortgages and company loans.
Increased guidance
While smaller competitors have seen net interest income damaged by higher rates this yr, JPMorgan continued to profit from the speed environment.
The bank said Friday it now expects that net interest income will total $88.5 billion this yr, up from guidance of $87 billion given in July. It was the fourth time the bank increased its guidance this yr.
During a conference call with analysts, Dimon and CFO Jeremy Barnum criticized U.S. regulators’ push to extend capital levels at banks with no less than $100 billion in assets. Unless modified, the plan would boost JPMorgan’s required capital by 25%, or $50 billion, according to the bank.
“A capital increase of this magnitude is disconcerting and there is lots that doesn’t make sense to us,” Barnum said, adding that regulators have repeatedly said U.S. banks were already well capitalized.
Shares of JPMorgan have climbed 8.7% this yr through Thursday, far outperforming the 19% decline of the KBW Bank Index.
Wells Fargo and Citigroup posted results on Friday that topped expectations for revenue. Bank of America and Goldman Sachs report Tuesday, and Morgan Stanley discloses results on Wednesday.
