J.P. Morgan's Profits Up on Lending Boost -- Update
12 October 2017 - 10:45PM
Dow Jones News
By Emily Glazer
J.P. Morgan Chase & Co. said its third-quarter profit rose
7.1% as a boost from lending offset weaker trading results for the
nation's biggest bank by assets.
Shares slipped 0.4% premarket, even as earnings and revenue beat
expectations.
The bank reported a profit of $6.73 billion, or $1.76 a share.
That compares with a profit of $6.29 billion, or $1.58 a share, in
the same period of 2016. Analysts polled by Thomson Reuters had
expected earnings of $1.65 a share.
Revenue rose 2.7% to $26.2 billion. Analysts had expected $25.23
billion.
Investors will next turn to the bank's earnings call Thursday
morning to find out whether Chief Executive James Dimon or Chief
Financial Officer Marianne Lake will shed light on topics ranging
from the bank's trading revenue, which could foreshadow results
across Wall Street, and further views on long-awaited regulatory
changes from the Trump administration.
The boost from still low -- but rising -- interest rates will
also likely be a major focus, as an increase in rates can help the
profitability of big consumer lenders like J.P. Morgan. Sharp moves
in the yield of the 10-year Treasury in the third quarter had
whipsawed bank shares.
Rates have risen this year as the Federal Reserve has increased
its short-term target. But the 10-year hasn't risen as much,
leading to a flattening of the yield curve, which can hamper bank
profits.
J.P. Morgan's trading revenue decreased 21% to $4.53 billion
from $5.75 billion a year earlier. Mr. Dimon said at a September
banking conference that trading revenue was likely to fall around
20% in the third quarter compared with the year-earlier period, but
predicted that volatile markets -- ripe for trading -- would
return.
Costs decreased to $14.32 billion from $14.46 billion a year
earlier. Executives said in a February investor presentation that
expenses are expected to rise in 2017 to fund investments and
growth.
Legal costs totaled a benefit of $148 million in the third
quarter, compared with a cost of $16 million in the second quarter
and a gain of $85 million in a year earlier.
Return on equity, a measure of profitability, was 11% in the
third quarter compared with 10% a year ago.
J.P. Morgan, run by Chief Executive James Dimon, is one of two
banks, along with Citigroup Inc., kicking off third-quarter
earnings season for U.S. financial institutions. The two large
banks offer investors a snapshot of a quarter that analysts expect
will be characterized by softer loan growth and trading headwinds.
Also, with expected regulatory loosening not yet resulting in
definitive changes, U.S. interest rates continue to be one of the
biggest drivers for bank results later in 2017.
Since the election, J.P. Morgan's shares are up 38%, alongside a
34% jump in the KBW Nasdaq index of bank stocks.
Though bank stocks have been fairly flat in the months following
the postelection surge, they came roaring back toward the end of
the third quarter, in part due to investor optimism around a
tax-code overhaul.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
October 12, 2017 07:30 ET (11:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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