Wall Street Giant JPMorgan Beats Market Estimates for Q3 Earnings, JPM Stock Falls…

JPM stock was down 1.38% on Tuesday’s opening hours in the market. The bank has reported better-than-expected net profits with the bottom line getting good support from its investment banking services.

On Tuesday, October 13, Wall Street banking giant JPMorgan Chase & Co (NYSE: JPM) delivered better-than-expected Q3 earnings. During Q3 2020, the bank reported a net profit of $9.44 billion with $2.92 earnings per share.

This is a nearly 5% jump in net profits and EPS compared to Q3 2019. Besides, Q3 2020 also exceeded analysts’ expectations by $1.5 billion, during the earnings call JPMorgan CEO Jamie Dimon said:

“JPMorgan Chase earned $9.4 billion of net income on nearly $30 billion of revenue and we maintained our credit reserves at $34 billion given significant economic uncertainty and a broad range of potential outcomes. We further strengthened our capital and liquidity position, increasing CET1 capital to $198 billion (13.0% CET1 ratio, up 60 basis points after paying the dividend) and liquidity sources to $1.3 trillion”.

The bank’s bottom line got huge support from its corporate and investment banking services. JP Morgan’s global investment banking fees jumped 9% to $2.2 billion. The bank’s fixed-income revenue jumped 29%, equity markets revenue jumped 32%, and total markets revenue jumped 30% to $6.6 billion.

The company’s performance comes despite paying close to $1 billion in the penalty for its role in manipulating the metals and treasury market. The bank has also set aside $611 million in provision for loan losses due to the Coronavirus pandemic. While JP Morgan was aggressively building its loan-loss reserves during the first half of 2020, it reduced them by $569 million in Q3 with a run-off in the mortgage portfolio.

During the earnings call, Jamie Dimon said that the bank’s total loan loss reserves currently stand at $34 billion. This is a significant war chest to battle any uncertainties with the COVID-19 pandemic.

JPMorgan: Bank’s Base Case for U.S. Economy Improves in Q3

during the earnings call, JP Morgan CFO Jennifer Piepszak said that the bank’s “base case” for the U.S. economy improves in comparison to the last quarter. For Q4 2020, the bank has reduced the unemployment estimates from 11% to now at a 9.5% rate. Besides, the contraction in GDP will also be less compared to previous expectations.

However, the bank still has most of its outcomes tied to the Coronavirus pandemic. In case, things proceed as per its base scenario, the bank will have surplus reserves of $10 billion. However, if the opposite happens, then in the worst-case scenario, the bank will be under-reserved by $20 billion. Dimon added:

“There’s so much uncertainty…We’re just saying that will increase the chance of good outcomes. We don’t know the future. It’s all about probability and how we can reserve today. We’d like to maximize the chance of good outcomes. We believe a decent stimulus package would be helpful.”

Despite the better results JPM stock (NYSE: JPM) is down during the opening hours of the market. At press time, JPM stock price is trading 1.38% down for $100.93.

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