JPMorgan Chase has kicked off the US banks’ third-quarter reporting season in a positive fashion, posting an 11 per cent rise in earnings-per-share despite a lacklustre performance from the trading and investment-banking arm.
Analysts had expected EPS of $1.65 from the largest US bank by assets, up from $1.58 a year ago.
In the end, JPMorgan’s EPS for the September quarter came in at $1.76, on revenues of $25.3bn, slightly higher than the $24.7bn reported a year ago. Analysts had expected revenues of $25.2bn.
The struggling division this time was markets and investor services, where the fixed-income unit saw revenues drop 27 per cent from a Brexit-boosted period a year earlier.
“[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, in a press release. 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.”
The results suggest that one strong theme of the earnings season will be relative weakness on Wall Street, set against continued resilience of retail and commercial businesses. At a Barclays-hosted conference in New York last month, which took place with about four-fifths of the quarter in the books, most banks said they expected revenues from trading stocks and bonds to drop by between 15 and 20 per cent, blaming low volumes and low volatility.
That means that gains for the biggest banking groups should be muted. 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.
That EPS number may come even as the number of shares outstanding continues to fall, as banks ramp up buyback programmes with the blessing of the US Federal Reserve. According to Barclays, average shares are expected to fall 1.2 per cent in the third quarter, the largest drop since before the financial crisis.
During the earnings call with Mr Dimon and Marianne Lake, CFO, this morning, analysts will be focused on the outlook for loan growth. Federal Reserve data for the third quarter shows growth in total loans outstanding of about 3 per cent, year-over-year, down from the 4 per cent rate of the second quarter and the 8 per cent rate a year ago. Within that, commercial and industrial lending ticked up less than 2 per cent, the smallest increase in more than two years.
They are also likely to probe the bank on how much damage it sustained as a result of the unusually severe hurricane season in the Caribbean and across the south of America.
The bank’s return on equity for the period came to 11 per cent, flat from a year earlier.