JPMorgan Chase (JPM) -) posted better-than-expected third quarter earnings Friday, thanks in a part to a surge in net interest income, while warning that geo-political risks have created "the most dangerous time the world has seen in decades."
JPMorgan said earnings for the three months ending in September were pegged at $13.15 billion, or $4.33 per share, up 28.9% from the same period last year and firmly ahead of the Street consensus forecast of $3.36 per share.
Managed revenues, JPMorgan said, rose 21% to $40.69 billion, just ahead of analysts' estimates of a $39.57 billion tally, while net interest income rose 30% to a record $22.9 billion a result of the higher interest rate environment, offsetting a slump in global dealmaking fees amid a dearth of new listings and takeovers so far this year.
Merger activity is over the first nine months of 2023 is down around 27% from last year's levels, according to Refinitiv data, with around $2 trillion in deals completed - the lowest total since 2013. Overall third quarter fees, according to Dealogic, are down 17% from last year at $15.2 billion.
The bank also set aside $1.38 billion to cover bad loans, well shy of the Street's $2.5 billion forecast, with a focus also on the unrealized losses in bond portfolios linked to the surge in Treasury yields that extended from early August until the end of September and added around 70 basis points to benchmark 10-year notes.
Currently, U.S. consumers and businesses generally remain healthy, although, consumers are spending down their excess cash buffers," said JPMorgan CEO Jamie Dimon. "However, persistently tight labor markets as well as extremely high government debt levels with the largest peacetime fiscal deficits ever are increasing the risks that inflation remains elevated and that interest rates rise further from here."
"Furthermore, the war in Ukraine compounded by last week's attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships," he added. "This may be the most dangerous time the world has seen in decades."
JPMorgan shares were marked 2% higher in late Friday trading following the earnings release to change hands at $148.60 extending the stock's six-month decline to around 15%.
"Despite no lift from investment banking fee income, JP Morgan is executing across most businesses with 18% (return on equity)," said Kenneth Leon, director of equity research at CFRA Research, who carries a 'buy' rating on JPMorgan stock.
"Loan growth remains critical to net interest income (NII) and non-interest income in 2023-2024, assuming economic growth," he added.
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