JPMorgan profit rises but misses Wall Street estimates
Web StoryWatch this story in 15 seconds →Key takeaways
- JPMorgan earned $15.3 billion in Q3, up 6% from a year ago.
- Profit still missed estimates: $5.57 per share versus $5.90 expected.
- CEO Jamie Dimon warned that risks are "shifting under the surface."
JPMorgan Chase made more money than last year. But it still missed Wall Street's targets. The bank reported third-quarter results on Tuesday, October 13.
Net income rose to $15.3 billion. That is up 6% from $14.4 billion a year ago. Earnings per share came in at $5.57.
That was up from $5.07 last year. But analysts had expected $5.90 per share, according to LSEG data cited by CNBC.
Revenue also fell short. It rose 8% to $50.9 billion. Analysts had expected $51.22 billion.
The miss was rare. JPMorgan had beaten estimates in 16 of its previous 20 quarters, according to StreetAccount data.
This article is for information only and is not financial advice.
What happened
The miss came from two gaps. Costs grew faster than revenue. And bond trading fell short.
Expenses rose 12% to $27.3 billion. Revenue rose only 8%. That gap squeezed profit.
The quarter also included $658 million of losses on investment securities. The bank called those losses discretionary. Without them, earnings would have been $5.75 per share.
That is still below forecasts. The miss came as bank earnings season kicked off on Wall Street.
Fixed-income trading was the weak spot. That unit trades bonds and related products. It brought in $5.4 billion.
That missed estimates by about $550 million, according to the New York Post.
Other parts of the bank did well. Markets revenue climbed 15% from a year ago. Investment banking fees rose 14%.
JPMorgan kept its spot as the top earner of investment banking revenue, according to Dealogic data. Net interest income rose 13% to $27.1 billion.
The bank also pulled back on buybacks. It repurchased $1.06 billion of its own stock in the quarter. That is down from $6.7 billion in the second quarter.
It is down from $8.3 billion a year ago. A new $50 billion buyback program took effect on July 1. The quarterly dividend rose to $1.65 per share from $1.50.
CEO Jamie Dimon explained the buyback cut in the earnings release. He said the bank ranks investing in its business first. Returning capital to shareholders comes after that.
He said the bank cut buybacks because it can put the capital to work at attractive returns over time.
Shares swung on the news. They fell about 3.5% in premarket trading. Then they turned about 1% higher by 7:20 AM in New York.
Why it matters
JPMorgan is the largest bank in the US. It is also the largest bank in the world by market value. When it misses, investors pay attention.
The miss matters because of the cost trend. Costs rose 12% while revenue rose 8%. A bank cannot keep that gap open for long.
If costs keep outpacing revenue, profit growth will stall.
The bond trading miss matters too. Trading desks have had a strong year. Market swings tied to rates and energy prices boosted trading.
A miss in that unit suggests the boom may be cooling.
Dimon's warning got the most attention. He said the US economy is still fueled by strong business investment and consumer spending. But he said risks are shifting under the surface.
He named large fiscal deficits, sticky inflation, high asset prices, rising rates, and geopolitical tensions. He said these forces may be manageable. But he said the bank stays prepared for a wide range of outcomes.
Dimon also warned of more pain if rates climb. He said financial pain across the US would worsen if interest rates rise another percentage point. Traders largely expect the Fed to hike rates another quarter point in December.
The contrast with Goldman Sachs stood out. Goldman blew past estimates on the same morning. Its net revenue hit $18.68 billion.
That is nearly $2 billion more than expected. Its equities trading revenue jumped 72% to $6.44 billion. Citigroup also beat estimates.
Wells Fargo had a mixed quarter. Bank of America and Morgan Stanley report on Wednesday.
What happens next
The bank earnings season is just starting. Bank of America and Morgan Stanley report on Wednesday. Their results will show if JPMorgan's cost pressure is an industry trend or a JPMorgan-only story.
Investors will watch trading revenue next. If bond trading stays weak, that could drag future quarters. If it bounces back, this quarter may look like a blip.
The Fed's next move matters too. US inflation data lands this week. A hot reading could push the Fed toward a December hike.
A soft reading could ease the pressure. Higher rates would squeeze borrowers and banks alike. The same rate pressure is lifting mortgage rates and moving markets in Toronto, as our TSX explainer covers.
For JPMorgan, the buyback cut is a signal. The bank is keeping cash to invest in its business. It is also keeping a buffer for tougher times.
Dimon's warning suggests he sees those times as possible, not certain.
The stock's next move will hinge on the wider market. If other banks report strong numbers, JPMorgan's miss may fade fast. If they also miss, the whole sector could slide.
Tuesday's mixed results leave that question open.
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