JPMorgan (JPM) Higher third quarter earnings thanks to M&A boom, modest loan growth


Rrobust advisory activities, the release of reserves and a modest increase in loan demand led JP MorganJPM’s third quarter 2021 earnings of $ 3.74 per share. The net result also significantly exceeded Zacks’ consensus estimate of $ 3.00.

The results included releases of credit reserves and tax benefits related to the finalization of the company’s 2020 U.S. federal income tax return. Excluding these, earnings were $ 3.03 per share. The company had earned $ 2.92 in the previous year’s quarter.

As predicted by Marianne Lake, co-CEO of the company’s CCB segment in mid-September, at an investor conference, market revenues have declined both year-over-year and steadily. sequential. In addition, as expected, income from equity markets showed strength (up 30% year over year), while income from fixed income markets disappointed, declining by 20%.

In addition, mortgage fees and related income fell 45% to $ 600 million.

Operating expenses increased slightly. In addition, average Commercial Banking loan balances were down 7% year-on-year.

During the third quarter, the company announced net reserve releases of $ 2.1 billion thanks to the continuously improving “economic outlook.”

Regarding the performance of the investment bank (“IB”), the subscription fees for shares and debt increased by 41% and 3% respectively. The exceptional and ongoing trading activity across the globe during the quarter led JPMorgan to record an 187% increase in advisory fees. As a result, IB’s fees jumped 52% from the previous year quarter. This was in line with management’s expectation of a “year-over-year increase but sequential decrease”.

While the rate cut continued to weigh on the bank’s interest income, it was more than offset by a modest increase in loan balances (consumer, credit and wholesale portfolios) and steepening of the yield curve during the quarter.

Among other positive points, average Asset & Wealth Management loan balances increased by 20% compared to the previous year quarter. Debit and credit card sales volume increased 26%, reflecting a steady improvement in consumer confidence and the economic outlook.

The overall performance of JPMorgan’s business segments, in terms of net revenue generation, has been impressive. All segments except Corporate saw improved year-over-year net income.

Net income increased 24% from the prior year quarter to $ 11.7 billion. Excluding the significant items mentioned above, net income was $ 9.6 billion.

Loan application, counseling fees help income, costs go up

Net income as published was $ 29.65 billion, up 1% from the previous year quarter. This increase is largely due to higher IB fees and an increase in the loan balance. The top line topped Zacks’ consensus estimate of $ 29.45 billion.

Net interest income increased 1% year-on-year to $ 13.1 billion.

Non-interest income also rose 2% to $ 16.6 billion, mainly due to strong performance from IB and higher fees related to loans and deposits. These were partially offset by lower mortgage and related bank commissions, card revenues and major transactions.

Non-interest expense (on a managed basis) was $ 17.1 billion, up 1%. This recovery is mainly due to continued investments in activities, in particular marketing and technology, and higher expenses related to volumes and sales.

Credit quality improves

The allowance for credit losses was a net income of $ 1.5 billion compared to the provision of $ 611 million in the prior year quarter. Additionally, net write-offs plunged 56% to $ 524 million.

As of September 30, 2021, non-performing assets stood at $ 8.9 billion, down 23% from September 30, 2020.

Strong capital position

The (estimated) Tier 1 capital ratio stood at 15% at the end of the third quarter, on par with the level in the previous year’s quarter. The (estimated) Tier 1 common equity ratio was 12.9%, compared to 13.1%. The total capital ratio was 16.9% (estimated) compared to 17.3% as of September 30, 2020.

The book value per share was $ 86.36 as at September 30, 2021, compared to $ 79.09 for the corresponding period of 2020. The tangible book value per common share was $ 69.87 at the end of September, compared to $ 63. , $ 96.

Update on share buybacks

During the quarter, JPMorgan repurchased shares worth $ 5 billion.

Our point of view

New branch openings, strategic acquisitions, IB’s global expansion plan and strong performance are expected to continue to support JPMorgan’s revenues. A slight increase in the loan balance is a major tailwind to the reopening of the economy. However, falling rates and disappointing mortgage banking and transactions are short-term concerns.

JPMorgan Chase & Co. Award, consensus and EPS surprise

JPMorgan Chase & Co. price-consensus-eps-surprise-chart | Quote from JPMorgan Chase & Co.

JPMorgan currently wears a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Date of earnings from other major banks

Bank of America BAC, Citigroup This Wells fargo The WFC is expected to release quarterly figures on October 14.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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