JPMorgan kicked off big bank earnings with a top-line beat. Adjusted revenue for Q3 was $30.44 billion, ahead of consensus ($29.86 billion) and near the top-end of the range.
EPS was $3.74, well ahead of an expected $2.97. Net income was $11.7 billion.
Notably, credit costs were a net benefit of $1.5 billion. That included a $2.1 billion net reserve release which Jamie Dimon was careful to qualify.
“We released credit reserves of $2.1 billion, as the economic outlook continues to improve and our scenarios have improved accordingly,” he said Wednesday. Last quarter’s release was $3 billion.
Dimon continued: “However, we do not consider these scenario-driven releases core or recurring profits [and] these reserve calculations, while done extremely diligently and carefully, involve multiple, multi-year hypothetical probability-adjusted scenarios, which may or may not occur and which may continue to introduce quarterly volatility in our reserves,” he added, noting that excluding the net reserve release (and an income tax benefit), earnings were $9.6 billion.
Everyone knows the benefits from reserve releases are temporary, so nobody should be disappointed when management reiterates the point. The fact they’re materializing is evidence that the worst case scenario from the pandemic didn’t unfold. Still, there’s a sense in which they make already opaque bank earnings even more difficult to parse. What’s not so difficult to discern is that $9.6 billion (JPMorgan’s earnings ex-reserve release) is a large number.
FICC was just in-line, which usually isn’t good enough from the market’s perspective. Revenue there was $3.67 billion, down 20%. Consensus wanted $3.7 billion. The drop will probably be forgiven, though, considering how out of the ordinary FICC was in 2020. The bank cited lower revenue in commodities, rates and spread products as compared to last year. In equities, performance was strong across the board. Revenue was up 30% to $2.6 billion.
Overall, markets revenue of $6.3 billion was down 5% YoY. Total markets and securities services revenue was $7.5 billion. Dimon described the drop in FICC as “continued normalization.” That’s not so much a euphemism as it is a statement of fact. FICC performance was anomalous in 2020 across Wall Street. The comps are distorted.
IB was strong for JPMorgan in Q3. Revenue of $3.03 billion was up 45% and represented a sizable beat. Consensus was $2.65 billion. Fees jumped 52% to $3.3 billion thanks to advisory and equity underwriting. Dimon touted a “surge in M&A activity” and the bank’s “strong” performance in IPOs. “JPMorgan Bankers Notch Record Quarter for M&A Advisory Business,” one headline declared.
The bank sees FY2021 NII around $52.5 billion, market dependent.
Dimon said the US economy “continues to show good growth, despite the dampening effect of the Delta variant and supply chain disruptions.”
He also noted that during Q3, JPMorgan “became the first bank to have branches in all of the lower 48 states, allowing us to serve more households, businesses and communities across the country.”
So, to America’s unbanked, just stroll on down to your brand new local Chase branch and deposit that check you don’t have. That’s the first step to realizing the American dream. Oh, and watch out for those overdraft fees.
Snark is obligatory right? At least mine isn’t gratuitous.