JPMorgan Chase shrugged off a big slump in revenues from bond trading last quarter to deliver a 7 per cent rise in net profits, due largely to a resilient performance from its consumer and small-business banking unit.
The New York-based bank, the first of the big US banks to report numbers for the third-quarter on Thursday morning, set a tone that is likely to be followed by others such as Bank of America and Citigroup.
While conditions were patchy on Wall Street, particularly compared with a Brexit-boosted period a year earlier, things were brighter for the bank on Main Street, where it saw increased auto-lease volume, credit card loan balances and margins between the yield on assets and the cost of deposit funding.
Net income from the consumer and community banking division came to $2.553bn, up 16 per cent from a year earlier, while the corporate and investment banking division saw a 13 per cent drop in net income to $2.546bn. Bond trading revenues were the culprit, falling 27 per cent from a year earlier to $3.16bn. Equity trading revenues slipped 4 per cent to $1.36bn.
Analysts had expected earnings per share of $1.65, up from $1.58 a year ago. In the end, EPS came in at $1.76 on revenues of $25.3bn, slightly higher than analysts’ estimates of $25.2bn and ahead of the $24.7bn reported a year ago.
“[The bank] delivered solid results in a competitive environment this quarter with steady core growth across the platform,” said Jamie Dimon, the bank’s chairman and chief executive. He noted that for the first time, JPMorgan Chase had risen to the top of the rankings by deposits, displacing Bank of America, “as consumers and businesses continue to view us as their partner of choice”.
Big banks had warned in recent weeks that they would struggle to meet the high bar they set last year in revenues from trading, which were boosted by flurries of activity across multiple classes of assets after the Brexit vote. The most recent quarter saw relatively benign markets, with stocks rising and credit spreads tightening, but volatility was low throughout and there were few catalysts to stir investors into putting on big trades.
That means that gains for the biggest banking groups, and investment banking-focused companies such as Goldman Sachs and Morgan Stanley, should be limited. At Credit Suisse, Susan Roth Katzke expects aggregate earnings per share for the top 13 banks to be 5 per cent cent higher than a year ago, the lowest year-on-year growth rate since the second quarter last year, which also saw muted trading activity.
The bank’s return on equity for the period came to 11 per cent, flat from a year earlier.
Chris Kotowski, analyst at Oppenheimer, described JPMorgan’s figures as “very solid” despite the big drop-off in trading, noting gains in the consumer bank and a record quarter from the asset and wealth management business, which delivered net income of $647m. Importantly, he added, credit quality remains “outstanding,” with non-performing assets down from $7.2bn last year to $6.9bn.