Oct. 13 (Reuters) – JPMorgan Chase & Co (JPM.N) topped analysts’ earnings estimates on Wednesday, thanks to record earnings from some investment banking businesses and a sunnier economic outlook that allowed the most major U.S. bank to unlock the money it had set aside for potential loan losses during the coronavirus pandemic.
JPMorgan’s third-quarter profit was 24% higher than the same period last year due to these factors, but analysts were more excited for customers to start spending and investing again. The bank’s average loans and deposits increased, as did credit card spending, helping JPMorgan’s credit income to rise 2.5% from the second quarter.
Executives were cautiously optimistic that the economy is finally on track after 19 months of pandemic-related illness, business closures, travel restrictions and home stay trends. They predicted that demand for loans might not change substantially until next year, the earliest, but were encouraged by the first signs the world is getting back on track.
“We don’t know the future any better than you do,” JPMorgan CEO Jamie Dimon said on a call with reporters. “What we really want is good growth right now. These are good numbers. By the end of 2022, people are predicting 4% unemployment, wages are going up, jobs are plentiful. of COVID, we should all be thanking our lucky stars. “
Investors often see JPMorgan not only as a major US bank, but as a symbol of the good performance of the global economy and markets. It has a substantial presence in almost every conventional lending business – from mortgages to commercial lending – one of Wall Street’s largest investment banks and multinational company information through its capital markets and operations. treasury services.
The highlight of JPMorgan’s third quarter was its Corporate & Investment Bank division, where advisory fees nearly tripled due to strong performance in mergers and acquisitions and stock underwriting, fueled in part by a wave of deals. initial public.
During the quarter, JPMorgan maintained its position as the world’s second-largest provider of mergers and acquisitions advice after Goldman Sachs Group Inc (GS.N), on a fee-basis, according to Refinitiv.
JPMorgan’s decision to release $ 2.1 billion from credit reserves also bolstered its profits. Dimon and many analysts and investors tend to remove “core” reserve fluctuations from their earnings analyzes because they are based on accounting standards and do not reflect the inflow of new money.
Overall, JPMorgan’s profit reached $ 11.7 billion, or $ 3.74 per share, in the quarter ended Sept. 30, from $ 9.4 billion, or $ 2.92 per share. , one year earlier. Excluding reserve release and tax benefit, its profit would be $ 9.6 billion, or $ 3.03 per share.
Analysts on average expected earnings of $ 3.00 per share, according to Refinitiv.
JPMorgan’s revenue increased 2% to $ 30.4 billion in the quarter. Analysts on average expected revenue of $ 29.8 billion.
The bank maintained its forecast of forecasting net interest income for the year at around $ 52.5 billion.
JPMorgan shares were down 2.3% in morning trading, as other big banks fell as well. Its shares rose about 5% in the weeks leading up to earnings, along with other big banks, in hopes of higher interest rates following comments from the Federal Reserve.
DELIVERY OF BUSINESS
Capital markets companies helped big Wall Street banks weather the pandemic, as investors rushed to respond to news of the pandemic and companies needed help raising capital or hedging business risks . More recently, as trading revenues declined, trading activity has intensified, with companies deciding to regroup or go public through Special Purpose Acquisition Companies (SPACs) and start-ups listing shares for. the first time.
JPMorgan’s Corporate & Investment Bank division posted a 6% increase in net sales to $ 12.4 billion. Its Consumer & Community Banking division posted a 2% drop in net sales to $ 12.5 billion. These two companies rank among the largest in terms of revenue, by quarter.
The lender’s commercial banking operations saw an 8% increase in net income to $ 2.5 billion, while Asset & Wealth Management reported a 20% increase to $ 4.3 billion.
In a conference call with analysts, management primarily answered questions about JPMorgan’s economic outlook and what the quarterly statistics suggest for the next few quarters. They wanted to know when the bank’s loan income would increase and how it could deploy all the money it had.
For example, card spending has increased dramatically, which would normally be a good sign for banks. But that didn’t always translate into higher profits, as individuals saved money during the pandemic while stuck at home, allowing them to pay off their balances and stay up to date on their bills. bills – avoiding interest payments or late fees.
Nonetheless, analysts said they were encouraged by the bank’s performance in what remains an imperfect environment for big banks, with low interest rates, a tough regulatory environment and risks of potential new waves of coronavirus infections. .
“JPMorgan has kicked off the reporting season, setting a clear positive tone for what a performing bank can offer,” said Susan Katzke, analyst at Credit Suisse.
Other major US banks including Bank of America (BAC.N), Citigroup (CN), Wells Fargo (WFC.N) and Morgan Stanley (MS.N) will release their results on Thursday, while Goldman Sachs (GS.N) ), Wall Street’s most prolific trader, will close the earnings season on Friday.
Reporting by Anirban Sen in Bengaluru and Elizabeth Dilts in New York; Additional reporting by Noor Zainab Hussain, Matt Scuffham, Niket Nishant and David Henry Writing by Lauren Tara LaCapra Editing by Saumyadeb Chakrabarty and Nick Zieminski
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