“This may be the most dangerous time the world has seen in decades,” Jamie Dimon said Friday, in a press release accompanying JPMorgan’s Q3 results.
As you might’ve noticed, events in the Mideast are at this point overshadowing market concerns almost entirely. Dimon warned that the attacks on Israel “compound” (as he put it) geopolitical uncertainty brought about by Russia’s ill-fated invasion of Ukraine. Together, the events may have “far-reaching impacts on energy and food markets, global trade and geopolitical relationships.”
I quote Dimon not because he has special insight into geopolitical matters, but rather to underscore the extent to which a world at war is hard to ignore, even if equities will surely try their best to look the other way.
JPMorgan’s $40.69 billion in revenue topped expectations for Q3. Consensus saw $39.9 billion. Net income rose 35% to $13.2 billion. Excluding First Republic, the YoY increase was 24%. EPS was $4.33.
Net interest income of $22.86 billion was a beat, and the bank lifted its full-year NII forecast to $88.5 billion from $87 billion.
NII rose more than 30% YoY in Q3. Do note: That would’ve been 21% excluding First Republic, as shown in the figure above.
The provision for credit losses was $1.4 billion. Net charge-offs of $1.5 billion were lower than expected, but nevertheless the highest since Q2 of 2020, when banks were still at pains to game out the implications of lockdowns, layoffs and business closures. Loans were $1.31 trillion, essentially in line.
FICC was fine. Revenue was basically flat at $4.5 billion. That was ahead of estimates.
Equities missed, though. Revenue there was $2.07 billion, down 10%.
IB was a beat. Revenue of $1.61 billion looked ok set against the $1.48 billion consensus. Although there are signs of an ECM comeback, an M&A renaissance is some ways off.
Advisory fees were $767 million for JPMorgan in Q3. That was up sharply from Q2, but down 10% YoY.
Equity underwriting remains very depressed. Debt underwriting fees were $676 million, down slightly QoQ but up around 8% from Q3 of 2022.
The bank logged $669 million of net investment securities losses, which subtracted $0.17 from earnings. Legal expenses lopped off another $0.22.
All in all, the results were decent. The worst thing about the report was Dimon’s macro commentary, which might fairly be described as foreboding. “Currently, US consumers and businesses generally remain healthy, although consumers are spending down their excess cash buffers,” he said, before warning on “persistently tight labor markets [and] extremely high government debt levels” which, together with “the largest peacetime fiscal deficits ever,” present upside risks to inflation, and thereby rates.
Dimon recently suggested that in a worst-case scenario, the Fed could raise rates to 7%.
“We still do not know the longer-term consequences of quantitative tightening, which reduces liquidity in the system at a time when market-making capabilities are increasingly limited by regulations,” he went on.
The good news is, JPMorgan will be fine, even in an apocalypse scenario. “Our liquidity is extraordinarily high,” Dimon said. “While we hope for the best, we prepare the Firm for a broad range of outcomes so we can consistently deliver for clients no matter the environment.”
So, when you’re trudging through the monochromatic remains of human civilization, rest assured you’ll still be able to get a crisp $20 from a dusty Chase ATM, somehow still functioning, a faint blue beacon of hope after the fall.
Does Dimon always slip a negative reference to regulations in his conference calls?
Yes. Usually more than one.
A JPM call without a Dimon regulatory critique wouldn’t be a JPM call.
Your writing is always great but this last paragraph is perfection!
I do what I can. 🙂
“This may be the most dangerous time the world has seen in almost a century” would have been more apropos imho…think Mr Dimon actually restrained himself somewhat…