JPMorgan Earnings Easily Clears Lowered Bar

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JPMorgan Chase & Co. (NYSE: JPM) reported third-quarter 2016 results before markets opened Friday morning. The investment bank and financial services giant reported adjusted diluted quarterly earnings per share (EPS) of $1.58 on revenue of $24.7 billion. In the same period a year ago, JPMorgan reported EPS of $1.68 on revenue of $22.8 billion. Third-quarter results also compare to the consensus estimates for EPS of $1.39 on revenue of $23.99 billion.

Quarterly profits dropped 8% from $6.8 billion in the third quarter of 2015 to $6.29 billion. The bank’s non-interest expenses declined 6% from $15.37 billion to $14.46 billion, driven by lower legal expenses and partially offset by higher compensation expense.

Non-interest revenues rose 10%, driven by corporate and investment banking fees. Provision for credit losses was $1.27 billion, compared with $682 million in the prior-year quarter, due to reserve increases in the current quarter versus reserve releases in the prior-year quarter and higher net charge-offs.

By divisions, net income in the consumer and community banking group fell by $426 million to $2.2 billion, commercial banking net income rose 50% to $778 million and asset management group net income rose 17% to $557 million for the quarter.

Corporate and investment banking group net income soared 99% from $1.46 billion to $2.91 billion and revenues rose 16%, all attributed to higher debt and equity underwriting fees combined with higher advisory fees. Lending revenue was $283 million, down 15%. Provision for credit losses in the group totaled $67 million, compared to $232 million in the prior-year quarter, primarily reflecting a lower reserves build in the oil and gas portfolio.

CEO Jamie Dimon said:

We had record net income in Commercial Banking and record loan balances in Asset Management. The Corporate & Investment Bank reported its best third quarter revenue. In the Consumer businesses, we grew both loans and deposits double-digits …

Over the past months we have continued our extraordinary efforts and submitted what we believe is a credible Resolution Plan, as we remain focused on our regulatory and control agenda.

JPMorgan increased its Basel III Tier 1 common ratio to 11.9% in the third quarter.

The bank did not offer guidance in its press release, but the consensus estimates call for fourth-quarter EPS of $1.37 and revenues of $23.74 billion. The EPS estimate for the 2016 fiscal year is $5.66, on revenues of $96.37 billion.

Shares traded up about 1.6% in Friday’s premarket to $68.85. The current 52-week range is $52.50 to $69.06. Thomson Reuters had a consensus 12-month price target of $71.27 before results were announced.

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