Jamie Dimon, chairman and CEO of JPMorgan Chase, at the U.S. Capitol for a lunch meeting with the New Democrat Coalition in Washington, D.C., June 6, 2023.
Nathan Howard | Bloomberg | Getty Images
JPMorgan Chase surpassed analysts’ expectations for Q3 profit and revenue.
Here’s what was reported:
- Earnings: $4.33 a share
- Revenue: $40.69 billion, compared to the estimated $39.63 billion from LSEG
The bank stated that profit rose 35% to $13.15 billion, or $4.33 a share, from the previous year. However, the figure is not directly comparable to the LSEG estimate due to a $665 million legal expense in the quarter. Excluding that expense would have increased per share earnings by 22 cents.
Revenue increased by 21% to $40.69 billion, primarily due to stronger-than-expected net interest income, which surged 30% to $22.9 billion, exceeding analyst expectations by approximately $600 million. Additionally, credit provisioning of $1.38 billion was significantly lower than the estimated $2.39 billion.
CEO Jamie Dimon acknowledged that JPMorgan was “over-earning” on net interest income and experiencing “below normal” credit costs, which will eventually normalize. While rising interest rates have affected smaller banks, JPMorgan has managed the situation well so far.
Dimon also mentioned that although American consumers and businesses are doing well, households are depleting cash balances, and high government debt levels and tight labor markets could lead to further interest rate increases.
“The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” said Dimon. “This may be the most dangerous time the world has seen in decades. While we hope for the best, we prepare the firm for a broad range of outcomes.”
Last month, bank stocks plummeted after the Federal Reserve announced its plan to keep interest rates higher to combat inflation amidst unexpectedly strong economic growth. The 10-year Treasury yield, a crucial indicator for long-term rates, rose by 74 basis points in Q3.
Higher interest rates have negatively impacted banks in several ways. The industry has had to increase deposit rates as customers move their holdings to higher-yielding alternatives like money market funds. Additionally, rising yields cause the value of banks’ bond holdings to decrease, leading to unrealized losses that put pressure on capital levels. Finally, higher borrowing costs dampen demand for mortgages and corporate loans.
Banks, including JPMorgan, have also set aside more funds to prepare for anticipated loan losses.
Wall Street is not expected to provide much support this quarter, with investment banking fees likely to remain low and trading revenue anticipated to be flat or slightly down.
Analysts are eager to hear Dimon’s insights on the economy and his predictions for the banking industry. Dimon has been vocal in his opposition to proposed increases in capital requirements.
JPMorgan’s shares have risen by 8.7% year-to-date, significantly outperforming the 19% decline of the KBW Bank Index.
Wells Fargo and Citigroup will release their results later this morning. Bank of America and Goldman Sachs will report their results on Tuesday, and Morgan Stanley will disclose their results on Wednesday.
This story is developing. Please check back for updates.
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