JPMorgan Exceeds Profit Expectations on $1.5 Billion Boost From Better-Than-Expected Loan Losses

Tiffany Hagler-Geard | Bloomberg | Getty Images
  • Here are the numbers: earnings of $3.74 per share vs. $3 per share estimate of analysts surveyed by Refinitiv.
  • Revenue: $30.44 billion vs, $29.8 billion estimate.

JPMorgan Chase on Wednesday posted third-quarter results that exceeded expectations on a $1.5 billion boost from better-than-expected loan losses.

The gain came after the bank released $2.1 billion in reserves and had $524 million of charge-offs in the quarter, New York-based JPMorgan said in a release.

The bank produced $3.74 per share in earnings, which includes a 52 cent per share boost from reserve releases and a 19 cent per share benefit tied to a tax filing. JPMorgan shares dipped 2.7%, giving up gains in premarket trading.

Here are the numbers:

  • Earnings: $3.74 per share vs. $3 per share estimate of analysts surveyed by Refinitiv.
  • Revenue: $30.44 billion vs $29.8 billion estimate.

The bank "delivered strong results as the economy continues to show good growth - despite the dampening effect of the Delta variant and supply chain disruptions," CEO Jamie Dimon said in the statement. "We released credit reserves of $2.1 billion as the economic outlook continues to improve and our scenarios have improved accordingly."

Dimon reiterated a message from previous quarters, which also benefited from reserve releases, that managers didn't consider the gain to be fundamental to their business. The firm set aside billions of dollars for losses last year after the onset of the coronavirus pandemic, and this year has been releasing those funds after the losses didn't arrive.

Indeed, analysts have said that banks have exhausted most of the benefit from releases and must now rely on core activities like growing loans and rising interest rates to boost profits.

Companywide revenue rose 2% to $30.4 billion, mostly driven by booming fees in the firm's investment banking and asset and wealth management divisions. Net interest income of $13.2 billion edged out the $12.98 billion StreetAccount estimate on higher rates and balance sheet growth.

Fixed income revenue dropped 20% to $3.67 billion, below the $3.73 billion StreetAccount estimate. But equities trading revenue more than made up the shortfall, producing $2.6 billion, beating the $2.16 billion estimate.

Robust levels of mergers and IPO issuance in the quarter helped the firm's investment bank. The company posted a 50% increase in investment banking fees to a record $3.28 billion, exceeding the estimate by half a billion dollars.

For most of the pandemic, booming trading revenue across Wall Street has benefited JPMorgan's investment bank. But that was expected to moderate in the third quarter. Last month, JPMorgan executive Marianne Lake said that trading revenue will be 10% lower than a year ago, which was an unusually strong quarter.

The firm's asset and wealth management division posted a 21% increase in revenue to $4.3 billion on higher management fees and growth in balances. Assets under management rose 17% to $3 trillion on rising equity markets.

Companywide loan growth has stabilized and should pick up next year, driven by higher spending and increased revolving of debts by credit-card users, CFO Jeremy Barnum told analysts during a conference call.

Executives were asked about the bank's acquisition strategy after a string of recent deals. Last month, it acquired restaurant review service the Infatuation and college planning platform Frank. That followed three acquisitions of fintech start-ups in the past year.

Barnum hinted that the bank's deals will likely continue, saying that "acquisitions are still potentially on the horizon" next year.

Shares of JPMorgan have climbed 30% this year before Wednesday, trailing the 37% increase of the KBW Bank Index.

Become a smarter investor with CNBC Pro
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. 
Sign up to start a free trial today.

Copyright CNBC
Contact Us