JPMorgan is moving closer to leaving the pandemic behind, its results show

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Oct 13 (Reuters) – JPMorgan Chase & Co (JPM.N) surpassed analyst earnings estimates on Wednesday, thanks to record earnings at some investment banking firms and sunnier economic outlook that allowed the largest U.S. bank to release funds it owned had set aside for possible loan defaults during the coronavirus pandemic.

JPMorgan’s third quarter earnings were 24% higher than the same period last year due to these factors, but analysts were most enthusiastic about the signs that customers are back to spending and investing. The bank’s average loans and deposits increased, as did credit card spending, which caused JPMorgan’s loan income to grow 2.5% from the second quarter.

Executives were cautiously optimistic that after 19 months of pandemic illness, business closings, travel restrictions and stay-at-home tendencies, the economy is finally on a healthy path. They predicted that credit demand would not change significantly until next year at the earliest, but were encouraged by the first signs that the world was getting back on track.

“We don’t know the future better than you do,” said Jamie Dimon, CEO of JPMorgan, in an interview with journalists. “What we really want now is good growth. These are great numbers. By the end of 2022, people are predicting, “4% unemployment, wages are rising, jobs are plentiful. If we find out COVID, we should all thank our lucky stars. “

Investors often see JPMorgan not just as a major American bank, but as a symbol of how well the global economy and markets are doing. She is heavily involved in almost all conventional lending businesses – from mortgages to commercial lending – one of Wall Street’s largest investment banks and insights into multinational corporations through its capital markets and treasury services.

The high point of JPMorgan’s third quarter was Corporate & Investment Bank, where advisory fees nearly tripled due to strong M&A and equity underwriting performance, fueled in part by a spate of IPOs.

During the quarter, JPMorgan maintained its position as the second largest provider of global M&A advice after Goldman Sachs Group Inc (GS.N) based on fees, according to Refinitiv.

JPMorgan’s decision to free up $ 2.1 billion from loan reserves also boosted profits. Dimon and many analysts and investors tend to remove reserve fluctuations from the “core” of their earnings analysis because they are based on accounting standards and do not reflect new money that is coming in.

Overall, JPMorgan’s earnings rose to $ 11.7 billion, or $ 3.74 per share, for the quarter ended September 30, compared to $ 9.4 billion or $ 2.92 per share last year . Without the release of reserves and an income tax break, earnings would be $ 9.6 billion, or $ 3.03 per share.

According to Refinitiv, analysts had expected an average profit of USD 3.00 per share.

JPMorgan’s revenue rose 2% to $ 30.4 billion for the quarter. Analysts were expecting an average revenue of 29.8 billion US dollars.

The bank maintained its guidance that it expects net interest income for the year to be around $ 52.5 billion.

JPMorgan’s shares lost 2.3% in morning trading, with other major banks also falling. Their stocks rose about 5% in the weeks leading up to the results, along with other major banks as they hoped for higher interest rates, according to a comment from the Federal Reserve.

DEALMAKING IS RISING

Capital markets firms helped large Wall Street banks through the pandemic as investors scrambled to respond to news of the pandemic and companies needed help raising capital or hedging business risks. More recently, as trading revenues have declined, there has been a surge in transaction activity, with companies choosing to merge or go public through special acquisition companies (SPACs), and young companies listing stocks for the first time.

JPMorgan’s Corporate & Investment Bank division saw net sales grow 6% to $ 12.4 billion. The Consumer & Community Banking division posted a 2% decrease in net sales to $ 12.5 billion. These two companies switch to the largest by revenue depending on the quarter.

The lender’s commercial banking business saw net revenue grow 8% to $ 2.5 billion, while Asset & Wealth Management grew 20% to $ 4.3 billion.

In a conference call with analysts, management mainly asked questions about JPMorgan’s economic outlook and the results of the quarterly statistics for the next few quarters. They wanted to know when the bank’s loan income would increase and how to use all of the cash on hand.

For example, card spending has increased dramatically, which would normally be a good sign for banks. This hasn’t always resulted in higher profits, however, as individuals saved money during the pandemic while stuck at home to settle balances and stay on top of bills – avoiding interest payments or late fees.

Still, analysts said they were encouraged by the bank’s performance in an environment that remains imperfect for big banks, with low interest rates, a difficult regulatory environment and risk from potential new waves of coronavirus infections.

“JPMorgan has opened the reporting season and has set a clearly positive tone for what a bank can do,” said Susan Katzke, an analyst at Credit Suisse.

Other major U.S. banks, including Bank of America (BAC.N), Citigroup (CN), Wells Fargo (WFC.N), and Morgan Stanley (MS.N), will report results Thursday, while Goldman Sachs (GS.N ), Wall Street’s most prolific deal maker will close the winning season on Friday.

Reporting by Anirban Sen in Bengaluru and Elizabeth Dilts in New York; Additional reporting from Noor Zainab Hussain, Matt Scuffham, Niket Nishant and David Henry Writing by Lauren Tara LaCapra Editing by Saumyadeb Chakrabarty and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.


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