JPM (JPMorgan Chase) Earnings Q3 2022

Jamie Dimon, CEO of JPMorgan Chase, says during the Senate Committee on Banking, Housing and Urban Affairs hearing entitled “Annual Oversight of the Nations Largest Banks” on Thursday, March 22.

Tom Williams | CQ Roll Call, Inc. | Getty Images

JPMorgan Chase results released on Friday beat analysts’ estimates as the largest US bank by assets used rising interest rates to generate more interest income.

Here are the numbers:

  • Earnings: $3.12 per share, beating the estimate of $2.88 by analysts polled by Refinitiv.
  • Revenue: $33.49 billion, beating the estimate of $32.1 billion.

The bank said third-quarter earnings fell 17% year over year to $9.74 billion, or $3.12 a share, as the company increased reserves for bad loans by a net $808 million. dollar has spiked. Excluding a loss of 24 cents per share, which was linked to losses in investment securities, the bank posted earnings of $3.36 per share, far beating analysts’ estimate.

Revenue rose 10% to $33.49 billion in the quarter thanks to higher interest rates as the Federal Reserve fights inflation. Net interest income rose 34% to $17.6 billion for the period, driven by higher interest rates and a growing loan portfolio. That exceeded analysts’ expectations by more than $600 million.

Shares of the New York-based bank rose 2.6%.

Jamie Dimon, CEO of JPMorgan, noted that while consumers and businesses were financially resilient over the period, the economic picture darkened:

“We have significant headwinds immediately ahead – stubbornly high inflation leading to higher global interest rates, the uncertain impact of quantitative tightening, the war in Ukraine increasing all geopolitical risks, and the fragile state of oil supplies and prices. ‘ Dimon said in the statement. “While we hope for the best, we always remain vigilant and prepared for poor results.”

The first signs of these headwinds began to appear during the quarter. JPMorgan posted losses of $959 million in equities after deciding to sell government and mortgage bonds to reposition its portfolio.

Analysts were concerned about the impact a slowing economy would have on the bank. If the U.S. unemployment rate rises to 5 to 6 percent, the bank would likely need to increase its loan loss reserves by about $5 to $6 billion over a few quarters, Dimon said in a conference call on Friday.

JPMorgan, the largest US bank by assets, is being closely watched for clues as to how banks are navigating a confusing environment.

On the one hand, unemployment remains low, meaning consumers and businesses have little trouble paying off loans. Rising interest rates mean that banks’ lending business is becoming more profitable in their core business. And volatility in financial markets has been a boon for fixed income traders.

But investors have been dumping bank stocks of late, pushing JPMorgan and others to fresh 52-week lows this week on fears the Federal Reserve will inadvertently trigger a recession. Investment banking and mortgage lending revenues have fallen sharply and companies may report write-downs as financial assets fall.

In addition, banks have been expected to increase loan loss reserves as fears of a recession mount; According to analysts, the six largest US banks by assets are expected to collectively set aside $4.5 billion in reserves.

That jibes with the cautious tone of Dimon, who said this week he sees a recession hitting the US in the next six to nine months.

Last month, JPMorgan President Daniel Pinto warned that third-quarter investment banking earnings are headed for a fall of up to 50% on a slump in IPO activity and debt and stock issuance. To offset this, trading revenue was heading for a 5% year-over-year increase on strong activity in the fixed income space, he said.

This guidance proved correct; The bank said investment banking fees fell 47% in the quarter, while trading revenue rose 8%.

JPMorgan shares are down 31% this year through Thursday, worse than the 25% drop KBW banking index.

MorganStanley published results below expectations due to sharp declines in investment banking and wealth management revenues. Wells Fargo and Citigroup also released mixed results Friday. Bank of America is scheduled to report on Monday, followed by Goldman Sachs on Tuesday.

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