The nation’s largest bank blew away expectations by reporting a profit of $9.4 billion during the third quarter, up 4% from the year before. Per-share profit jumped to $2.92, easily topping estimates.
JPMorgan’s ( big beat was driven by strong trading and investment banking performance as well as far fewer credit losses than feared. )
During the first half of the year, JPMorgan braced for defaults and bankruptcies by ramping up loan-loss reserves by a staggering $19 billion.
JPMorgan surprisingly opted not to build its loan-loss cushion — a positive sign for the bank. In fact, JPMorgan released $600 million of reserves, leaving the company with a still-massive $33.8 billion allowance for credit losses. The bank reported bad debt that it doesn’t expect to recover, also known as net charge-offs, of $1.2 billion, down from the prior year.
The moves suggest confidence about the economic recovery, or at least the health of loans in its portfolio.
JPMorgan’s revenue dipped 11%, but that also was better than feared.
After losing money during the second qwuarter, JPMorgan’s Main Street business swung back into the black. The consumer and community banking division earned $3.9 billion, down 9% from the year before. Revenue also retreated 9%. The brightest spot was home lending, where revenue climbed amid the ongoing housing boom.
In another positive, JPMorgan reported $29.3 billion of mortgage, auto and other consumer loans with payment deferrals amid the pandemic, down by more than half from the end of June. That represents just 3.4% of JPMorgan’s consumer loans. And the bank said that 92% of consumer accounts that exited payment deferral are now current on their loans.
Investment banking, trading strength
Like other big banks, JPMorgan continues to benefit from the V-shaped recovery on Wall Street.
Profits surged 52% to $4.3 billion at JPMorgan’s corporate and investment bank. Investment banking revenue climbed 12% as a flurry of IPOs and bond sales drove up equity and debt underwriting fees.
On the trading front, JPMorgan reported a 29% jump in revenue from its markets and securities services business. That was driven by across-the-board strength, spanning equities, fixed income and especially commodities, credit and securitized products.
The pandemic has slammed the banking industry — JPMorgan included. The bank has lost about a quarter of its value so far this year. JPMorgan’s $308 billion market valuation is now dwarfed by those of Tesla ( and )Nvidia (. )
But JPMorgan has weathered the storm better than some of its rivals.
Citigroup’s ( share price is down more than 40% on the year and the bank recently announced the )surprise retirement of CEO Michael Corbat. Wells Fargo ( has lost more than half of its value this year and the money-losing bank recently )cut its dividend for the first time since the Great Recession.