JPMorgan edges closer to leaving pandemic behind, its earnings show

FILE PHOTO: Portfolio beer brands of Budweiser Brewing Company APAC Ltd are displayed during a news conference on the company's IPO in Hong Kong, China July 4, 2019. REUTERS/Andrew Geoffrey Jackson/File Photo

JPMorgan Chase & Co (JPM.N) beat analysts’ profit estimates on Wednesday, thanks to record revenue in some investment banking businesses and a sunnier economic outlook that allowed the largest U.S. bank to release money it had set aside for potential loan losses during the coronavirus pandemic.

JPMorgan’s third-quarter profit was 24% higher than the same period last year, and the bank’s average loans and deposits rose, as did credit-card spending, helping JPMorgan’s lending income rise 2.5% from the second quarter.

On a call with analysts, executives were cautiously optimistic that the economy is finally on a healthy path after 19 months of pandemic-related illness, business closures, travel restrictions and stay-at-home trends. They predicted loan demand may not substantially change until next year at the earliest, but were encouraged by early signs that the world is getting back on track.

“We don’t know the future any better than you do,” JPMorgan CEO Jamie Dimon said on a call with journalists. “What we really want is good growth right now. These are great numbers. By the end of 2022, people are forecasting 4% unemployment, wages are going up, jobs are plentiful. Getting out of COVID, we should all be thanking our lucky stars.”

Analysts were enthusiastic about the signals that customers are getting back to spending and investing.

“While the (loan) numbers aren’t big, we think people will be excited to be at or near an inflection point,” Evercore ISI analyst Glenn Schorr wrote in a note to investors.

JPMorgan’s shares fell nearly 2.6% Wednesday, after touching an all-time high last week of $171.51, suggesting investors may be taking profits. Shares of other major banks Citigroup (C.N), Goldman Sachs (GS.N), Morgan Stanley (MS.N), Well Fargo & Co (WFC.N) and Bank of America Corp (BAC.N) fell between 0.2% and 1.7%.

Investors often see JPMorgan not just as a big American bank, but as a symbol of how well the global economy and markets are doing. It has a substantial presence in almost all conventional lending businesses – from mortgages to commercial loans – one of the largest investment banks on Wall Street and insights into multinational corporations through its capital markets and treasury services operations.

The highlight for JPMorgan’s third quarter was its Corporate & Investment Bank division, where advisory fees almost tripled due to strong performance in M&A and equity underwriting, fueled partly by a spate of initial public offerings.

During the quarter, JPMorgan maintained its position as the second-biggest provider of worldwide M&A advisory after Goldman Sachs Group Inc (GS.N), based on fees, according to Refinitiv.

JPMorgan’s decision to release $2.1 billion from credit reserves also bolstered its profit. Dimon and many analysts and investors tend to remove reserve fluctuations from “core” their earnings analyses, because they are based on accounting standards and do not reflect new money coming in the door.

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