JPM’s Q1 trading woes seemed like a distant memory when the largest US bank by assets released its Q3 results some 8 minutes early, and reported a solid beat on both the top and bottom line, with $25.5 billion in non-GAAP revenue ($24.7 billion on an actual basis), well above the $23.93BN expected, and 8% higher than a year ago, resulting in $6.3 billion in net income ($500MM lower than a year ago), and $1.58 in reported EPS (rising by 1 cent if one excludes a legal charge), a solid beat to the $1.39 consensus estimate, if 10 cents below Q3 2015.
The same numbers however without the non-GAAP adjustments:
J.P. Morgan’s trading revenue rose by one-third to $5.75 billion from $4.34 billion in the third quarter of 2015. Costs decreased 5.9% to $14.46 billion from $15.37 billion a year earlier, an effort the bank continues to drill down on, though Chief Financial Officer Marianne Lake said earlier this year those drops would begin to taper off.
The bank recorded an unusual legal gain of $71 million during the third quarter after having to set aside $1.3 billion for legal expenses in the same period a year ago. In the second quarter, J.P. Morgan took a legal gain of $430 million that was mostly “associated with favorable developments” but declined to specify further.
Return on equity, a measure of the J.P. Morgan’s profitability, was 10% in the third quarter compared with 12% in the third quarter a year ago. J.P. Morgan has continued to face more forceful questions from analysts, investors and shareholders over the past year over whether it might be better for shareholders if the global bank broke itself up into smaller, more manageable units.
According to CEO Jamie Dimon, the company delivered “strong” results, with each business “performing well,” generating record commercial banking net income and asset management loan balances.
While the rest of the company did largely as expected, the big surprise was in the Corporate and Investment Bank division, where total revenue jumped $1.3 billion to $9.455 billion, primarily as a result of a surge in Fixed Income markets, which soared by $1.4 billion to $4.334 billion, smashing expectations of $3.17 billion, as Equity Market revenue of $1.414 billion was largely unchanged from a year ago, and modestly higher than the $1.35bn expected. Q3 Investment banking also rose, higher by $210 million from last year to $1.74bn, beating estimate of $1.54 billion.
The breakdown:
- IB revenue of $1.7B, up 14% YoY, driven by strong performance across all products
- Treasury Services revenue of $917mm, up 2% YoY
- Lending revenue of $283mm, down 15% YoY
- Markets & Investor Services revenue
- Markets revenue of $5.7B, up 33% YoY
- Fixed Income Markets of $4.3B, up 48% YoY, driven by higher revenue in Rates, Credit and Securitized Products
- Equity Markets revenue of $1.4B, up 1% YoY
- Securities Services revenue of $916mm, flat YoY
- Credit Adjustments & Other, a loss of $149mm
- Expense of $4.9B, down 20% YoY, driven by lower legal expense
On the consumer banking side, total revenue jumped to $11.3 billion, up $449 million from a year ago, with mortgage banking net revenue hitting $1.87b, up $319 million frm a year ago. Loan originations declined to $27.1b from $29.9 billion, while the average core loan was up 2% q/q, 15% y/y
In Q3, JPM had a total loan loss reserve of $14.3 billion, $23 million lower than the previous quarter, while the total amount of nonperforming loans declined to $7.1 billion, roughly $100 milion lower compared to the previous quarter. The provision for credit losses was $1.27b, slightly below the estimated $1.40b.
Regarding its outlook, JPM said the following:
- 2016 net charge-offs to be ~$4.75b, increase y/y due to oil & gas, loan growth
- 2016 adj. expense ~$56b
- 4Q adj. expense about flat y/y
- 4Q net interest income to be up modestly q/q on continued strength in loan growth
- 4Q Securities Services revenue to be ~$875mm, market dependent
Finally, while there was little to complain about in this otherwise impressive report, a modest increase in credit card delinquencies has been observed which one should keep a closer eye on.
The full Q3 earnings presentation is below:
via http://ift.tt/2dPc4RZ Tyler Durden