JPMorgan Chase was weighed down by higher loan loss provisions amid economic concerns and weak investment banking in the third quarter.
Despite higher interest income, profits fell 17 percent year-on-year to $9.7 billion (€10 billion), the largest US bank announced on Friday. Provisions for impaired loans and high write-downs on securities all but offset an increase in earnings.
CEO Jamie Dimon explained that consumer spending and the labor market in the USA have so far developed well. However, he warned of “significant headwinds” that are imminent. Persistently high inflation is leading to higher interest rates and uncertainties worldwide due to tighter monetary policy. There are also geopolitical risks from the war in Ukraine and a fragile situation in terms of oil supplies and prices.
The interest surplus is growing again
In the third quarter, JPMorgan had adjusted revenues of $33.5 billion – 10 percent more than a year earlier and more than experts had expected. Net interest income even jumped more than a quarter to $17.6 billion. However, the bank allocated $1.5 billion in loan loss provisions after releasing a similar amount of provisions in the prior-year period. Write-downs on securities also hit almost a billion dollars.
Investment banking is also weakening, as companies in the uncertain market environment have fewer confidences in IPOs and mergers. On the other hand, bank boss Dimon now expects an even higher net interest income for the year as a whole: apart from the corporate and investment bank, it should rise to $61.5 billion instead of $58 billion. The stock rose by more than 5 percent at the start of the US stock exchange. Dimon hopes to resume buying back its own shares in early 2023. The bank suspended its buyback program in July to meet higher regulatory capital requirements.
JPMorgan’s US rival Citigroup also made significantly less profit despite higher revenues. The bottom line is that Citi earned $3.5 billion ($3.6 billion), about a quarter less than a year ago, according to its own statement on Friday. Analysts had expected an even steeper decline. The earnings of the money house increased by six percent to 18.5 billion dollars. However, Citi set aside $370 million as collateral for bad loans. A year ago, the bank had liquidated more than $1 billion in reserves. In addition, Citi had to cope with significantly higher costs and cutbacks in investment banking.
The smaller US bank Morgan Stanley, which is primarily geared towards capital market business, suffered a 30 percent drop in profits to $ 2.6 billion (2.7 billion euros), as announced on Friday. Revenues declined 12 percent to $13.0 billion. Investment banking revenue plummeted 55 percent. In view of the downturn on the stock exchanges, things also went worse than expected in the important stock trading division. A bright spot in the balance sheet was asset management, where revenues rose by three percent. Analysts had expected better numbers overall.
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