JPMorgan Q3 Profit Up 35%, Results Top Estimates

US investment bank JPMorgan Chase & Co. (JPM) reported Friday a profit for the third quarter that grew 35 percent from last year, driven by lower provision for credit losses and higher net interest income. However, both earnings per share and revenues for the quarter topped analysts’ expectations.

In pre-market activity on the NYSE, JPM shares are trading at $147.30, up $1.49 or 1.02 percent.

“The Firm delivered another quarter of solid results, generating net income of $13.2 billion and an ROTCE of 22%—although, we acknowledge that these results benefit from our over-earning on both net interest income and below normal credit costs, both of which will normalize over time,” said Chairman and CEO Jamie Dimon.

In early May, JPMorgan acquired substantial majority of assets and assumed certain liabilities of First Republic Bank following an auction by Federal regulators for the troubled lender. It did not assume First Republic’s corporate debt or preferred stock.

For the third quarter, net income increased to $13.15 billion or $4.33 per share from $9.74 billion or $3.12 per share in the prior-year quarter. Net income attributable to First Republic was $1.1 billion in the quarter. Net income was up 24 percent excluding First Republic.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $3.96 per share for the quarter. Analysts’ estimates typically exclude special items.

The provision for credit losses were $1.38 billion, compared to last year’s $1.54 billion, reflecting net charge-offs of $1.5 billion and a net reserve release of $113 million.

Total net revenue on a reported basis was $39.87 billion. On a managed basis, net revenue was $40.69 billion, including $669 million of net investment securities losses, up 21 percent from $33.49 billion in the previous year. Wall Street expected revenues of $39.57 billion for the quarter.

Net interest income was $12.9 billion, up 30 percent, or up 21 percent excluding First Republic, driven by higher rates and higher revolving balances in Card Services, partially offset by lower deposit balances.

Non-interest revenue was $17.8 billion, up 12 percent, or up 8 percent excluding First Republic, driven by higher CIB Markets noninterest revenue, higher asset management fees and lower net investment securities losses in Corporate compared to the prior year, partially offset by an impairment of an equity investment in Payments.

Noninterest expense was $21.8 billion, up 13 percent, , or up 9 percent excluding First Republic, predominantly driven by higher compensation, including growth in front office and technology headcount and wage inflation, as well as higher legal expense.

Banking & Wealth Management net revenue was $11.35 billion, up 43 percent or up 30 percent excluding First Republic, predominantly driven by higher deposit margins, partially offset by lower balances.

Card Services & Auto net revenue was $5.77 billion, up 7 percent, largely driven by higher Card Services net interest income on higher revolving balances, partially offset by lower auto operating lease income.

Banking revenue decreased 2 percent to $4.00 billion, while markets & securities services revenue also declined 2 percent to $7.73 billion from last year.

“Looking ahead to Basel III finalization, we intend to adapt and manage to the new rules very quickly as we have shown in the past. However, we caution that such material regulatory changes would likely have real world consequences for markets and end users,” Dimon added.

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