On Friday, JPMorgan Chase reported third-quarter profit and revenue that above analysts’ forecasts thanks to higher-than-anticipated interest income and lower-than-anticipated credit charges.
- ESSENTIAL POINTS
- In the third quarter, JPMorgan outperformed analysts’ predictions for both profit and revenue.
- Regarding the wars in the Ukraine and Israel and its potential effects on international markets, CEO Jamie Dimon stated in a release that “this may be the most dangerous time the world has seen in decades.”
Here’s what the company reported:
- Earnings: $4.33 a share
- Revenue: $40.69 billion, vs. $39.63 billion LSEG estimate
According to the bank, profit increased 35% from a year ago to $13.15 billion, or $4.33 per share. This amount was not directly comparable to the $3.96 per share LSEG prediction because JPMorgan incurred a $665 million litigation charge in the quarter that, if not included in results, would have increased earnings per share by 22 cents.
Due in part to higher-than-anticipated net interest income, revenue increased by 21% to $40.69 billion. Analyst forecasts were surpassed by about $600 million as that measure increased 30% to $22.9 billion. At the same time, credit provisioning came in at $1.38 billion, much less than the estimated $2.39 billion.
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In early trade, shares of JPMorgan increased by 4.7%. CEO Jamie Dimon stated that the largest bank in the United States in terms of assets was “over-earning” on net interest income and had “below normal” credit expenses, both of which will eventually return to normal. While some of JPMorgan’s smaller competitors were caught off guard by rising interest rates this year, unrest among local lenders in March was the result.
Although American consumers and businesses were doing well, Dimon cautioned that households were eating down their cash reserves and that “extremely high government debt levels” indicated that interest rates could rise significantly higher in the future.
The conflict in Ukraine, exacerbated by last week’s strikes on Israel, “may have profound effects on the global food and energy markets, as well as geopolitical relations,” according to Dimon. “This could be the most hazardous period the planet has ever experienced. We plan the firm for a wide variety of outcomes while hoping for the best.
The study is released following a time of ambiguity for American banks. After the Federal Reserve said it might maintain interest rates higher for longer than expected to battle inflation amid unexpectedly strong economic growth, bank stocks fell last month. A crucial indicator of long-term rates, the 10-year Treasury yield, increased by 74 basis points in the third quarter. One tenth of a percentage point is equivalent to one basis point.
Rate increases harm banks in a number of ways. Due to customers moving their holdings into vehicles with greater yields, such as money market funds, the sector has been compelled to pay more for deposits. Rising rates cause the value of the bonds that banks possess to decline, resulting in unrealized losses that put pressure on capital levels. Additionally, the demand for mortgages and business loans is stifled by increasing borrowing costs.
Through Thursday, JPMorgan’s stock had increased 8.7%, outpacing the 19% drop of the KBW Bank Index. On Friday, Wells Fargo and Citigroup released financial results that exceeded forecasts in terms of revenue. Morgan Stanley releases results on Wednesday, and Bank of America and Goldman Sachs report on Tuesday.
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