J.P. Morgan's Profits Up on Lending Boost -- 2nd Update
October 12 2017 - 8:23AM
Dow Jones News
By Emily Glazer
J.P. Morgan Chase & Co. said its third-quarter profit rose
7.1% as a boost from lending offset weaker trading results at the
nation's biggest bank by assets.
The bank reported net income of $6.73 billion, or $1.76 a share.
That compares with a profit of $6.29 billion, or $1.58 a share, in
the same period of 2016. Analysts polled by Thomson Reuters had
expected earnings of $1.65 a share.
Revenue rose 2.7% to $26.2 billion. Analysts had expected $25.23
billion.
Shares slipped 0.4% premarket after the results were
announced.
Investors will next turn to the bank's earnings call Thursday
morning to find out whether Chief Executive James Dimon or Chief
Financial Officer Marianne Lake will shed light on topics ranging
from the bank's trading revenue, which could foreshadow results
across Wall Street, and further views on long-awaited regulatory
changes from the Trump administration.
The boost from still low -- but rising -- interest rates will
also likely be a major focus, as an increase in rates can help the
profitability of big consumer lenders like J.P. Morgan. Sharp moves
in the yield of the 10-year Treasury in the third quarter had
whipsawed bank shares.
Rates have risen this year as the Federal Reserve has increased
its short-term target. But the 10-year hasn't risen as much,
leading to a flattening of the yield curve, which can hamper bank
profits.
J.P. Morgan's trading revenue decreased 21% to $4.53 billion
from $5.75 billion in the third quarter of 2016, hurt by a 27%
falloff in fixed-income trading revenue alongside a 3.6% decline in
equities.
J.P. Morgan extended $26.9 billion in mortgages in the quarter,
down 1% from the $27.1 billion the bank extended in the third
quarter a year ago. Revenue in its mortgage division, one of the
largest in the U.S. by volume, was $1.56 billion, down 17% from the
$1.87 billion it reported in the year-earlier period.
Overall profit at the corporate and investment bank was $2.55
billion, a 13% decrease from $2.91 billion in the same period last
year. In the consumer bank, profits were $2.55 billion compared
with $2.2 billion in the third quarter a year ago. J.P. Morgan's
commercial bank earned $881 million, a 13% increase from the $778
million it earned in the year-ago quarter, and the bank's
asset-management unit reported profits of $674 million compared
with $557 million in the third quarter of 2016.
J.P. Morgan set aside $1.46 billion in the third quarter to
cover loans that could potentially turn bad in the future. That
compares with $1.13 billion in the third quarter of 2016 and $1.18
billion in the second quarter of 2017. The bank lost $1.27 billion
to loan defaults, or 0.58% of its overall portfolio, compared with
a 0.56% charge-off rate in the second quarter of 2017.
Costs decreased to $14.32 billion from $14.46 billion a year
earlier. Executives said in a February investor presentation that
expenses are expected to rise in 2017 to fund investments and
growth.
Return on equity, a measure of profitability, was 11% in the
third quarter compared with 10% a year ago.
Since the election, J.P. Morgan's shares are up 38%, alongside a
34% jump in the KBW Nasdaq index of bank stocks.
Though bank stocks have been fairly flat in the months following
the postelection surge, they came roaring back toward the end of
the third quarter, in part due to investor optimism around a
tax-code overhaul.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
October 12, 2017 08:08 ET (12:08 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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