Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled Annual Oversight of the Nations Largest Banks, in Hart Building on Thursday, September 22, 2022.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
JPMorgan Chase on Friday posted third-quarter results that topped analysts’ estimates for profit and revenue as the firm reaped more than expected in interest income.
Here are the numbers:
- Earnings: $3.12 a share, may not be comparable with the $2.88 estimate, according to Refinitiv.
- Revenue: $33.49 billion, vs. $32.1 billion estimate.
The bank said net interest income surged 34% in the quarter to $17.6 billion, thanks to higher interest rates and an expanding book of loans. That topped analysts’ expectations by more than $600 million. Shares of the New York-based bank rose 2.3% in premarket trading.
JPMorgan CEO Jamie Dimon noted that while consumer health was strong in the period, there are “significant headwinds ahead:
“In the U.S., consumers continue to spend with solid balance sheets, job openings are plentiful and businesses remain healthy,” Dimon said in the statement. “However, there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.”
JPMorgan, the biggest U.S. bank by assets, will be watched closely for clues on how banks are navigating a confusing environment.
On the one hand, unemployment levels remain low, meaning consumers and businesses have little difficulty repaying loans. Rising interest rates mean that banks’ core lending activity is becoming more profitable. And volatility in financial markets has been a boon to fixed income traders.
But investors have dumped bank shares lately, pushing JPMorgan and others to fresh 52-week lows this week, on concern that the Federal Reserve will inadvertently trigger a recession. Investment banking and mortgage lending revenue has fallen sharply, and firms could disclose write-downs amid the decline in financial assets.
On top of that, banks are expected to begin to boost reserves for loan losses as concerns of a recession increase; the six biggest U.S. banks by assets are expected to set aside a combined $4.5 billion in reserves, according to analysts.
That aligns with the cautious tone from Dimon, who said this week that he saw a recession hitting the U.S. in the next six to nine months.
Last month, JPMorgan president Daniel Pinto warned that third-quarter investment banking revenue was headed for a decline of up to 50%, thanks to the collapse in IPO activity and debt and equity issuance. Helping offset that, trading revenue was headed for a 5% jump from a year earlier on strong fixed income activity, he said.
As a result, investors should expect a mishmash of conflicting trends in the quarter and a wider-than-usual range of outcomes among the six biggest U.S. institutions.
Shares of JPMorgan have dropped 31% this year through Thursday, worse than the 25% decline of the KBW Bank Index.
Morgan Stanley, Wells Fargo and Citigroup are also scheduled to report results Friday, followed by Bank of America on Monday and Goldman Sachs on Tuesday.
This story is developing. Please check back for updates.
