JPMorgan Notches Another Net Interest Income Record, Lifts Guidance

JPMorgan Chase & Co. posted another quarter of record net interest income and boosted its forecast for the year as the company benefits from higher interest rates and its purchase of First Republic Bank.

(Bloomberg) — JPMorgan Chase & Co. posted another quarter of record net interest income and boosted its forecast for the year as the company benefits from higher interest rates and its purchase of First Republic Bank. 

The biggest US bank also reduced its reserves for loan losses even as Chief Executive Officer Jamie Dimon warned that the economic outlook was getting cloudier, especially given rising geopolitical risks with wars raging in Ukraine and the Middle East.

“This may be the most dangerous time the world has seen in decades,” Dimon said in a statement Friday. He also issued notes of caution about the records set in the third quarter. “These results benefit from our over-earning on both net interest income and below normal credit costs, both of which will normalize over time.”

JPMorgan’s results mirror similar gains at Wells Fargo & Co., which reported Friday that net interest income — the difference between what a bank earns on loans and the amount it pays out on deposits — also topped estimates. The third-quarter reports offer the latest look at how US consumers and businesses are faring as the Federal Reserve leaves borrowing costs higher for longer than most economists had predicted. 

JPMorgan’s NII was $22.9 billion in the three months through Sept. 30, above analysts’ expectations. The bank said it now expects to generate $88.5 billion from the revenue source this year. 

Shares of JPMorgan, up 13% this year, climbed 3.9% to $151.49 at 9:36 a.m. in New York, the biggest increase in almost six months. Wells Fargo also jumped 3.9%.

JPMorgan also provided a snapshot of how the company is integrating First Republic Bank, which it purchased in a government-led auction in May. Dimon said in August that the process had been “excellent,” and that the regional-bank turmoil that led to First Republic’s collapse is “over for now.” The bank said Friday that net income attributable to First Republic was $1.1 billion in the third quarter.

Friday also kicks off the first round of bank earnings since US regulators proposed a new set of capital rules that would force the eight largest lenders to boost the amount they set aside by about 19%. Wall Street executives have said the increased requirements would slow the economy. Investors are keen for further executive commentary on what the possible fallout might be. 

JPMorgan said total loans rose 18% from a year earlier. Deposits fell 1%.

The lender reported $1.5 billion in net charge-offs, citing credit-card loans for the increase. Dimon said last month that higher card losses are “normalization” from exceptionally low levels in recent years, and that his firm has been “over-earning on credit.” JPMorgan reduced the pile of money set aside for potentially soured loans by $113 million, while analysts had expected a reserve build.

Click Here for a Snapshot of JPMorgan’s Third-Quarter Results

Investment-banking fees came in at $1.7 billion, above expectations. Revenue from equity underwriting and advising on mergers and acquisitions fell from a year earlier, while debt underwriting increased. In an internal memo to corporate- and investment-bank employees Friday, President Daniel Pinto said the firm is “encouraged by the level of capital markets activity in September, and we have a healthy pipeline of deals going into the fourth quarter.”

Markets revenue fell from a year ago, driven by a 10% drop in equity trading. That was partially offset by a surprise 1% gain for fixed-income traders, while analysts had expected a slight drop. JPMorgan attributed the gain to higher revenue in securitized products and credit.

The results also included $669 million in net investment securities losses and $665 million of legal expenses.

The firm lowered its full-year adjusted expense guidance to about $84 billion, excluding a planned Federal Deposit Insurance Corp. special assessment tied to regional bank failures earlier this year. JPMorgan had previously said it expected the metric, which excludes legal costs, to come in at about $84.5 billion for the year.

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