JPMorgan's Third Quarter Earnings
JPMorgan kicked off the third quarter earnings season this morning. The company reported a rise in net interest income (NII) and trading revenues, which helped offset a decline in profits and an unexpected increase in credit loss reserves. Despite a drop in net income and a surprise jump in loan loss reserves to $1.0 billion, the company's stock initially responded positively, rising 2%.
Key Figures from JPMorgan's Q3 Report
JPMorgan's adjusted revenue for the third quarter was $43.32 billion, up 3.4% from a year ago and exceeding estimates of $41.9 billion. The company's net interest income was $23.5 billion, up 3.2% year over year (y/y), beating estimates of $22.8 billion. Non-interest income was $19.8 billion, up 3.2% y/y, and also surpassed estimates of $19.2 billion.
Total trading revenue was $7.152 billion, up 6.9% y/y, exceeding estimates of $6.69 billion. The bank's investment banking revenue was $2.27 billion, up 13.4% y/y, beating estimates of $1.99 billion. However, equity underwriting revenue was down 9.0% y/y, missing estimates of $378.2 million.
The bank's earnings per share (EPS) was $4.37, up 8.99% from a year ago, and beating estimates of $4.01. The bank's total noninterest expenses were $22.6 billion, down 1.2% YoY and below estimates of $22.9 billion. However, compensation expenses were up 2% y/y, higher than estimates of $12.56 billion.
Loan Loss Reserves and Credit Losses
While JPMorgan's net charge-offs in Q3 dropped to $2.09 billion, below the estimate of $2.37 billion, the reserve build grew again, rising to $1.0 billion from $0.8 billion in Q2 and up from a $0.1 billion reserve release a year ago. This means that the total provision for credit losses was $3.11 billion, higher than the estimate of $2.94 billion, and in line with the $3.1 billion in Q2.
Balance Sheet Details and Stock Buybacks
Looking at the bank's balance sheet, the net yield on interest-earning assets was 2.58%, higher than the estimate of 2.57%. The bank's standardized CET1 ratio was 15.3%, higher than the estimate of 15.1%. The bank's managed overhead ratio was 52%, below the estimate of 54.7%. The return on equity was 16%, higher than the estimate of 14.5%, and the return on tangible common equity was 19%, higher than the estimate of 17.5%.
JPMorgan also revealed that its Q2 stock buybacks surged to $6.0 billion from $4.9 billion last quarter, and up from $2.8 billion in Q1. This took place after the Federal Reserve approved more shareholder returns at the end of Q2.
Comments from Jamie Dimon
Jamie Dimon, CEO of JPMorgan, commented on the quarter's results, pushing back against aggressive regulation and stating that he is waiting for new rules on the Basel III endgame and the G-SIB surcharge. He also mentioned that the bank has an extraordinarily strong balance sheet, with total loss-absorbing capacity of $544 billion plus cash and marketable securities of $1.5 trillion, while its riskiest assets, loans, total $1.3 trillion.
Dimon also expressed his concerns about the geopolitical situation, stating that conditions are treacherous and getting worse. He mentioned that while inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world.
Bottom Line
JPMorgan's third quarter earnings report shows a mixed bag of results. While the company saw a rise in net interest income and trading revenues, it also experienced a decline in profits and an unexpected increase in credit loss reserves. Despite these challenges, the company's stock initially responded positively. However, it remains to be seen if these gains will persist once the results are fully analyzed. What are your thoughts on JPMorgan's third quarter earnings report? Share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
