JPMorgan reports superior third quarter results, Jamie Dimon sees inflation and interest rate risk

  • JPMorgan on Friday released third-quarter results that beat Wall Street forecasts.
  • The bank’s net income rose 10%, but net income fell 17% as it built up its credit reserves.
  • CEO Jamie Dimon touted the strength of the US economy, but pointed to a series of global headwinds.

JPMorgan Chase on Friday reported third-quarter results that beat Wall Street expectations, pushing its stock up as much as 2% in premarket trading.

Here are the key numbers:

  • Revenue: $32.7 billion vs consensus estimate of $32.09 billion from analysts polled by Refinitiv
  • Adjusted net income: $9.74 billion vs an estimate of $8.49 billion
  • Adjusted EPS: $3.12 vs $2.88 estimate

The US banking giant posted a 10% year-on-year increase in net revenue to around $33 billion, as sales rose in three of its four main divisions. However, its net income fell 17% to less than $10 billion as profits fell in three segments.

The decline in revenue largely reflects the net addition of $808 million to its credit reserves, after releasing $2.1 billion in the same period last year. Net write-offs, or deemed bad debts, increased $203 million to $727 million.

Rising interest rates helped boost JPMorgan’s net interest income by 34%. However, its non-interest income fell 8% due to a 47% drop in investment banking fees, nearly $1 billion in investment losses at its corporate bank and weak home loans.

CEO Jamie Dimon defended the US economy in a statement. Yet he also highlighted the challenges of rising prices and interest rates, tighter monetary policies and the impact of Russia’s invasion of Ukraine on geopolitical risks and the global energy market. .

“In the United States, consumers continue to spend with strong balance sheets, job openings are plentiful, and businesses remain healthy,” he said.

“However, there are significant headwinds immediately ahead of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which all heightens geopolitical risks, and the fragile state of oil supply and prices,” he added.

Here is a breakdown of the performance of JPMorgan’s four key divisions:

JPMorgan’s retail banking division grew net income 14% to more than $14 billion in the period as higher deposit spreads and growth in deposits offset weak home lending. Net income was flat at $4.3 billion as the segment added a net $529 million to its credit reserves.

The key corporate and investment banking segment saw a 4% drop in net income to $11.8 billion, but net income jumped 37% to $3.5 billion. It suffered from a 47% drop in investment banking fees, but payment and lending revenue rose sharply. Meanwhile, market revenue rose 8% as fixed income trading offset lower equity trading. The division has set aside $513 million for interim credit losses.

JPMorgan’s commercial banking business reported a 21% increase in net income to $3 billion as higher deposit margins offset lower investment banking revenue. However, net profit fell 44% to $946 million as the segment added $618 million to its credit reserves.

Finally, the bank’s wealth management division increased net income 6% to $4.5 billion, reflecting deposits and loans on higher margins and balances. Its net profit also rose 2% to $1.2 billion as it released $102 million net of credit reserves. Assets under management fell 13% to $2.6 trillion, reflecting lower market levels and cash outflows, partially offset by net inflows into long-term products.

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