JPMorgan Earnings Limited by Drops in Trading, Fixed Income

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JPMorgan Chase & Co. (NYSE: JPM) reported fiscal third-quarter 2017 results before markets opened Thursday morning. The investment bank and financial services giant reported diluted earnings per share (EPS) of $1.76 on managed revenue of $26.2 billion. In the same period a year ago, JPMorgan reported EPS of $1.58 on revenue of $25.51 billion. Third-quarter results compare to the consensus estimates for EPS of $1.65 on revenue of $25.23 billion.

Quarterly profits rose 13% from $6.29 billion in the third quarter of 2016 to $6.73 billion. The bank’s noninterest expenses fell by 1% from $14.46 billion to $14.32 billion.

Noninterest revenues slipped 4%, driven by lower revenue from the bank’s trading group. Provision for credit losses was $1.45 billion, compared with $1.27 billion in the prior-year quarter, due primarily to a larger net reserve release and higher net charge-offs. The net reserve increase of $303 million in the consumer portfolio was $77 million higher than in the prior year quarter.

By divisions, net income in the consumer and community banking group rose by 15% to $2.55 billion, commercial banking net income rose 13% to $881 million and asset management group net income rose 21% to $674 million for the quarter.

Corporate and investment banking group net income fell 13% from $2.91 billion to $2.55 billion as revenues slipped by 9%. Lending revenue was $331 million, up 17%. Provision for credit losses in the group totaled a benefit of $26 million, compared to an expense of $67 million in the prior-year quarter. The banks said the benefit was the result of the reserve release in energy.

Revenue fell 16% in the bank’s markets and investors services group and fixed income revenues were down 27% as “lower revenue across all products was driven by sustained low volatility and tighter credit spreads, against a very strong prior year.”

More lending at higher rates (thanks to the Federal Reserve) boosted net income, but trading revenues fell and the drop in fixed income revenues will weigh on the stock price.

CEO Jamie Dimon said:

JPMorgan Chase delivered solid results in a competitive environment this quarter with steady core growth across the platform. And for the first time, the Firm led the nation in total U.S. deposits, as consumers and businesses continue to view us as their partner of choice

The bank did not offer guidance in its press release, but the consensus estimates call for fourth-quarter EPS of $1.69 on revenues of $25.23 billion. The EPS estimate for the 2017 fiscal year is $6.79 on revenues of $101.58 billion.

Shares traded down about 0.4% in Thursday’s premarket at $96.40. The current 52-week range is $66.74 to $97.64. The consensus 12-month price target was $97.15 before results were announced.