JP Morgan Chase

  • JP Morgan posted a strong set of results for   the third quarter that beat analysts’ estimates for both top and bottom line,   despite a challenging macro operating environment as a result of the Covid-19   pandemic .

  • Third quarter profits of   $9.94 billon, equivalent to $2.92 earnings per share, exceeded consensus of   $2.23 per share. Revenue growth was 4% higher than market expectations and   tangible book value per share up 6% y-o-y.

  • The bright spot for the   bank, was the trading division with revenue up 30%, with heightened activity   in fixed income and equities, whilst investment banking revenue rose 12% on   the back of strong underwriting fees, in a buoyant Investment banking   environment. Jamie Dimon, group CEO said that “the corporate and investment   bank continues to be a big driver of performance”.

  • After substantially   bolstering reserves by $20 billion in the first half of the current year, the   bank unexpectedly reduced its reserves for credit losses by $569 million with   JP Morgan’s improved optimism for a recovery in the US economy.

  • Delinquencies in the   credit book have remained low thus far as a result of stimulus efforts by the   Fed and robust government spending, which are both expected to be a feature   of future policy. Loan demand still remains weak, which is a worry for the   market, and is a factor of a still fragile recovery. Around 92% of accounts   that came out of provisions are now currently up to date on their payments.   During the recent conference call the CEO said that JPM could be   over-reserved by $10 billion to cover bad loans, with the reserves standing   at $34 billion, if the economy continues its current rate of recovery. The   loan-loss reserves reduction of $569 million in the third quarter was not   expected by the market, and appeared to be due to the positive results of the   asset quality as well as that of tight credit management initiatives. This   also had had a positive impact on the group’s profitability, as did low   interest rates.

  • JP Morgan was recently   granted the right to open branches in ten additional states in the US, which   is a testament to the financial strength of the group in a period of high   volatility and uncertainty. In addition, the company hopes to get permission   to be able to buy back its own shares in due course, which should be a   positive for shareholders.

  • The company has had a sound track record and consistent delivery of returns to shareholders over the past few years. Its diverse income streams from investment and consumer banking are a positive aspect of its resilient business model, as is the hands-on leadership of the chief executive Jamie Dimon.

JP Morgan Chase