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JPMorgan's Q3 Earnings Beat on Solid IB, Jump in Provisions Hurt
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High interest rates and solid investment banking (IB) business performance drove JPMorgan’s (JPM - Free Report) third-quarter 2024 earnings to $4.37 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.02.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
Behind JPMorgan’s Headline Numbers
As expected, the IB business witnessed a solid growth. Equity underwriting fees jumped 26% and debt underwriting fees grew 56%. Also, advisory fees rose 10%. Overall, total IB fees were up 31% from the prior-year quarter to $2.27 billion.
Markets revenues grew 8% to $7.2 billion. Specifically, fixed-income markets revenues were stable at $4.5 billion, while equity trading numbers jumped 27% to $2.6 billion. Our estimates for equity and fixed-income markets revenues were $2.5 billion and $4.6 billion, respectively.
High interest rates, modest consumer spending and a decent growth in loan balance (up 2% year over year) supported NII during the quarter. Management now expects NII to be approximately $92.5 billion for this year, a rise of $500 million from the prior guidance.
Among other positives, Consumer & Community Banking average loan balances were up 1% year over year. Further, debit and credit card sales volume increased 6%.
During the quarter, operating expenses witnessed a rise. Management expects adjusted non-interest expenses to be roughly $91.5 billion this year. The figure includes the increase in the FDIC special assessment in the first quarter and the Foundation contribution in the second quarter.
Mortgage fees and related income fell 2% to $402 million. We had projected the metric to be $339.3 million. Further, the company reported a jump in provision for credit losses in the quarter signaling the expected worsening operating backdrop.
JPM’s Revenues Jump, Expenses Rise
Net revenues, as reported, were $42.7 billion, up 7% year over year. The top line outpaced the Zacks Consensus Estimate of $41.06 billion.
NII rose 3% year over year to $23.41 billion. This was driven by higher rates, higher revolving balances in Card Services and the impact of the balance sheet mix, partially offset by lower deposit balances and deposit margin compression. Our estimate for NII was $22.86 billion.
Non-interest income increased 12% to $19.25 billion. Our estimate for non-interest income was $18.58 billion.
Non-interest expenses (on a managed basis) were $22.56 billion, up 4%. This upswing was due to a rise in all cost components, except other expenses. We had projected non-interest expenses to be $22.95 billion.
The performance of JPMorgan’s business segments, in terms of net income generation, was not so impressive. The Commercial & Investment Bank and Corporate segments witnessed a rise in net income on a year-over-year basis. On the other hand, the Consumer & Community Banking and Asset & Wealth Management segments incurred losses. Overall, net income declined 2% to $12.9 billion. We had projected net income to be $11.95 billion.
JPMorgan’s Credit Quality Weakening
Provision for credit losses was $3.11 billion, surging substantially from the prior-year quarter. Our estimate for the metric was $2.45 billion.
Net charge-offs (NCOs) jumped 39% to $2.09 billion. Also, as of Sept. 30, 2024, non-performing assets (NPAs) were $8.63 billion, up 6%.
JPM’s Capital Position Solid
Tier 1 capital ratio (estimated) was 16.4% at the third-quarter end, up from 15.9% in the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 15.3%, up from 14.3%. Total capital ratio was 18.2% (estimated), up from 17.8%.
Book value per share was $115.15 as of Sept. 30, 2024, compared with $100.30 a year ago. Tangible book value per common share was $96.42 at the end of September 2024, up from $82.04.
Update on JPMorgan’s Share Repurchases
During the reported quarter, JPMorgan repurchased 30.3 million shares for $6.4 billion.
Our Viewpoint on JPM
New branch openings, strategic acquisitions, a global expansion plan, relatively high interest rates and decent loan demand are likely to keep supporting JPMorgan’s revenues. Further, a rebound in capital markets business will act as a tailwind. However, a potential economic slowdown, poor asset quality and mounting expenses are near-term concerns.
JPMorgan Chase & Co. Price, Consensus and EPS Surprise
Citigroup (C - Free Report) is scheduled to announce third-quarter 2024 numbers on Oct. 15.
Over the past 30 days, the Zacks Consensus Estimate for C’s quarterly earnings has moved 2.9% south to $1.36. This implies a 10.5% decline from the prior-year reported number.
Bank of America (BAC - Free Report) is slated to report third-quarter 2024 numbers on Oct. 15.
Over the past month, the Zacks Consensus Estimate for BAC’s quarterly earnings has been revised 2.5% downward to 78 cents. This indicates a 13.3% decline from the prior-year quarter.
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JPMorgan's Q3 Earnings Beat on Solid IB, Jump in Provisions Hurt
High interest rates and solid investment banking (IB) business performance drove JPMorgan’s (JPM - Free Report) third-quarter 2024 earnings to $4.37 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.02.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Behind JPMorgan’s Headline Numbers
As expected, the IB business witnessed a solid growth. Equity underwriting fees jumped 26% and debt underwriting fees grew 56%. Also, advisory fees rose 10%. Overall, total IB fees were up 31% from the prior-year quarter to $2.27 billion.
Markets revenues grew 8% to $7.2 billion. Specifically, fixed-income markets revenues were stable at $4.5 billion, while equity trading numbers jumped 27% to $2.6 billion. Our estimates for equity and fixed-income markets revenues were $2.5 billion and $4.6 billion, respectively.
High interest rates, modest consumer spending and a decent growth in loan balance (up 2% year over year) supported NII during the quarter. Management now expects NII to be approximately $92.5 billion for this year, a rise of $500 million from the prior guidance.
Among other positives, Consumer & Community Banking average loan balances were up 1% year over year. Further, debit and credit card sales volume increased 6%.
During the quarter, operating expenses witnessed a rise. Management expects adjusted non-interest expenses to be roughly $91.5 billion this year. The figure includes the increase in the FDIC special assessment in the first quarter and the Foundation contribution in the second quarter.
Mortgage fees and related income fell 2% to $402 million. We had projected the metric to be $339.3 million. Further, the company reported a jump in provision for credit losses in the quarter signaling the expected worsening operating backdrop.
JPM’s Revenues Jump, Expenses Rise
Net revenues, as reported, were $42.7 billion, up 7% year over year. The top line outpaced the Zacks Consensus Estimate of $41.06 billion.
NII rose 3% year over year to $23.41 billion. This was driven by higher rates, higher revolving balances in Card Services and the impact of the balance sheet mix, partially offset by lower deposit balances and deposit margin compression. Our estimate for NII was $22.86 billion.
Non-interest income increased 12% to $19.25 billion. Our estimate for non-interest income was $18.58 billion.
Non-interest expenses (on a managed basis) were $22.56 billion, up 4%. This upswing was due to a rise in all cost components, except other expenses. We had projected non-interest expenses to be $22.95 billion.
The performance of JPMorgan’s business segments, in terms of net income generation, was not so impressive. The Commercial & Investment Bank and Corporate segments witnessed a rise in net income on a year-over-year basis. On the other hand, the Consumer & Community Banking and Asset & Wealth Management segments incurred losses. Overall, net income declined 2% to $12.9 billion. We had projected net income to be $11.95 billion.
JPMorgan’s Credit Quality Weakening
Provision for credit losses was $3.11 billion, surging substantially from the prior-year quarter. Our estimate for the metric was $2.45 billion.
Net charge-offs (NCOs) jumped 39% to $2.09 billion. Also, as of Sept. 30, 2024, non-performing assets (NPAs) were $8.63 billion, up 6%.
JPM’s Capital Position Solid
Tier 1 capital ratio (estimated) was 16.4% at the third-quarter end, up from 15.9% in the prior-year quarter level. Tier 1 common equity capital ratio (estimated) was 15.3%, up from 14.3%. Total capital ratio was 18.2% (estimated), up from 17.8%.
Book value per share was $115.15 as of Sept. 30, 2024, compared with $100.30 a year ago. Tangible book value per common share was $96.42 at the end of September 2024, up from $82.04.
Update on JPMorgan’s Share Repurchases
During the reported quarter, JPMorgan repurchased 30.3 million shares for $6.4 billion.
Our Viewpoint on JPM
New branch openings, strategic acquisitions, a global expansion plan, relatively high interest rates and decent loan demand are likely to keep supporting JPMorgan’s revenues. Further, a rebound in capital markets business will act as a tailwind. However, a potential economic slowdown, poor asset quality and mounting expenses are near-term concerns.
JPMorgan Chase & Co. Price, Consensus and EPS Surprise
JPMorgan Chase & Co. price-consensus-eps-surprise-chart | JPMorgan Chase & Co. Quote
JPMorgan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of JPM’s Peers
Citigroup (C - Free Report) is scheduled to announce third-quarter 2024 numbers on Oct. 15.
Over the past 30 days, the Zacks Consensus Estimate for C’s quarterly earnings has moved 2.9% south to $1.36. This implies a 10.5% decline from the prior-year reported number.
Bank of America (BAC - Free Report) is slated to report third-quarter 2024 numbers on Oct. 15.
Over the past month, the Zacks Consensus Estimate for BAC’s quarterly earnings has been revised 2.5% downward to 78 cents. This indicates a 13.3% decline from the prior-year quarter.