JPMorgan profit drops as it sets aside bigger provisions, but interest income climbs

JPMORGAN Chase’s third-quarter profit dropped as it set aside more money to cover potential loan defaults, while rising interest payments and investment banking revenue lifted its shares before the market open.

Banks are building up stockpiles – which act as a safeguard when borrowers default on their loans – to typical levels as consumers deplete the savings they built up during the pandemic.

JPMorgan set aside US$3.11 billion for likely credit losses, compared with US$1.38 billion a year ago, even though consumers’ financial health has remained solid despite elevated interest rates and fears over unemployment.

The investment bank raised its forecast for net interest income (NII) – the difference between it earns on loans and pays on deposits – to US$92.5 billion. It was expecting US$91 billion, while analysts polled by LSEG had forecast US$91.05 billion.

Wall Street expects NII for the industry to shrink in the coming quarters after the Federal Reserve cut interest rates last month.

The bank’s CEO, Jamie Dimon, maintained his guarded tone on the economy.

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said.

“There is significant human suffering and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history.”

Investment banking shines

The bank’s Wall Street operations were a bright spot as the prospect of monetary easing spurred a rally in equities in the third quarter and boosted dealmaking.

Investment banking fees surged 31 per cent, double the management’s guidance of 15 per cent last month. Strong performance in equities pushed trading revenue up 8 per cent, higher than the up to 2 per cent guidance the management had given last month.

Overall, profit fell 2 per cent to US$12.90 billion for the three months ended Sep 30. Earnings per share of US$4.37, however, exceeded expectations of US$4.01, according to estimates compiled by LSEG.

Shares rose about 2 per cent to US$217.23 in premarket trading, adding to their nearly 25 per cent gains this year. REUTERS