JPMorgan edges closer to leaving pandemic behind, its earnings show

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(Businesshala) – JPMorgan Chase & Co beat analysts’ profit estimates on Wednesday, thanks to record revenues at some investment banking businesses and a sunnier economic outlook that allowed the largest US bank to issue funds Was set aside for potential loan losses during the coronavirus. global pandemic.

FILE PHOTO: A view of the exterior of JPMorgan Chase & Company’s corporate headquarters on May 20, 2015 in New York City. Businesshala/Mike Seger

JPMorgan’s third-quarter profit was up 24% compared to the same period last year due to those factors, but analysts were most excited about signs that customers are returning to spending and investments. The bank’s average loans and deposits increased, as did credit-card spending, driving JPMorgan’s lending income up 2.5% from the second quarter.

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Executives were cautiously optimistic that the economy is finally on a healthy path after 19 months of pandemic-related illness, business closures, travel restrictions and a stay-at-home trend. He predicted credit demand might not turn until next year, at the earliest, but was encouraged by early signs that the world was getting back on track.

“We don’t know the future better than you,” JPMorgan CEO Jamie Dimon said on a call with reporters. “What we really want is good growth right now. These are big numbers. People are predicting 4% unemployment by the end of 2022, wages are up, jobs are plentiful. Coming out of COVID, we all have to.” We should thank our lucky stars.”

Investors often view JPMorgan not only as a big US bank, but as a symbol of how well the global economy and markets are doing. It has a substantial presence in nearly all traditional lending businesses — from mortgages to commercial lending — one of the largest investment banks on Wall Street and insight into multinational corporations through its capital markets and treasury services operations.

JPMorgan’s highlight for the third quarter was its corporate and investment bank division, where strong performance in M&A and equity underwriting nearly tripled advisory fees, partly due to initial public offerings.

According to Refinitiv, during the quarter, JPMorgan maintained its position as the second largest provider of M&A advisory worldwide after Goldman Sachs Group Inc.

Its gains were also bolstered by JPMorgan’s decision to release $2.1 billion from credit reserves. Dimon and many analysts and investors remove reserve fluctuations from the “core” of their earnings analysis, because they are based on accounting standards and do not reflect new money coming in the door.

Overall, JPMorgan’s profit rose to $11.7 billion, or $3.74 per share, for the quarter ended Sept. 30, compared to $9.4 billion, or $2.92 per share, a year ago. Excluding the reserve release and an income tax benefit, its profit would be $9.6 billion, or $3.03 per share.

Analysts had expected earnings of $3.00 per share on average, according to Refinitiv.

JPMorgan’s revenue rose 2% to $30.4 billion in the quarter. Analysts were expecting an average of $29.8 billion in revenue.

The bank maintained its guidance that it sees net interest income for the coming year to be approximately $52.5 billion.

JPMorgan shares were down 2.3% in morning trading, along with other major banks. Following commentary from the Federal Reserve on anticipation of higher interest rates, its shares, along with other major banks, resulted in a rise of about 5% in the coming weeks.

dealmaking pick up

Capital markets businesses helped big Wall Street banks through the pandemic, as investors scrambled to react to news about the pandemic and companies needed help to raise capital or hedge businesses’ risks. More recently, as trading revenues have declined, dealmaking activity has picked up, companies have decided to combine or go public through special purpose acquisition companies (SPACs), and fledglings listing shares for the first time. companies.

JPMorgan’s Corporate and Investment Bank division reported a 6% increase in net revenue to $12.4 billion. Its consumer and community banking division reported a 2% decline in net revenue to $12.5 billion. Those two businesses make the biggest toggles by revenue on a quarterly basis.

The lender’s commercial banking operations reported an 8% increase in net revenue to $2.5 billion, while Asset & Wealth Management reported a 20% increase to $4.3 billion.

On a conference call with analysts, management raised questions primarily about JPMorgan’s economic outlook and what the quarter’s data suggest for the next few quarters. They wanted to know when the bank’s borrowing income would rise, and how it could deploy all the cash it had.

For example, card spending has increased dramatically, which would generally be a good sign for banks. But that hasn’t always translated into higher profits, as individuals saved money during the pandemic while they were stuck at home, allowing them to pay off balances and stay current on bills – thereby reducing interest payments or Late fee can be avoided.

Nonetheless, analysts said they were encouraged by the bank’s performance with risks from an imperfect environment for large banks, low interest rates, a tough regulatory environment and potential new waves of coronavirus infections.

“JP Morgan has begun the reporting season, setting a clearly positive tone for what a bank can execute,” said Credit Suisse analyst Susan Katzke.

Other big US banks including Bank of America, Citigroup, Wells Fargo and Morgan Stanley will report results on Thursday, while Wall Street’s most prolific deal maker Goldman Sachs wraps up 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 La Capra Editing by Soumyadev Chakraborty and Nick Ziminsky

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