JPMorgan’s Q3 Profit Surges as Loan Provisions Slow to a Trickle

© Reuters. JPMorgan Earnings, Revenue Beat in Q3

By Geoffrey Smith — JPMorgan (NYSE:) reported earnings well ahead of expectations for the third quarter on Tuesday, thanks to a sharp drop in new reserves against possible credit losses and a strong performance from both its bond and equity trading divisions.

The bank, often seen as a bellwether for the U.S. economy because of its broad exposure to both financial markets and Main Street, said earnings per share totaled $2.92, some 30% above the $2.23 consensus forecast. Revenue totaled $29.94 billion, against expectations for $28.3 billion.

Loan loss provisions fell to a meager $611 million from a whopping $8.9 billion in the second quarter. Such provisioning measures the concerns a bank has that its borrowers won’t be able to repay their loans. As such, the sharp decline suggests that the post-Covid credit landscape has brightened considerably. The bank said it had released some $569 million of the provisions it booked three months ago.

“After record provisions for bad losses in Q2, there is a good chance that the lender has seen the worst on this front and investors should expect some stabilization,” analyst Haris Anwar said.

The bank’s core tier 1 capital ratio, a key measure of financial strength, rose by 60 basis points from the end of June to 13.0%.

The pandemic nonetheless left its scars, with income from the bank’s core lending division falling 9% from a year earlier to $13.1 billion, due largely to lower interest rates. Noninterest income, however, rose 7% to $16.8 billion, thanks to investment banking fees and trading profits. Markets revenue rose 30% while investment banking fees rose 9% on the year.

The bank’s asset management division also performed strongly, contributing $877 million to a group net profit of $9.4 billion.

(CORRECTION: An earlier version of this story incorrectly stated the loan loss provision number)

JPMorgan follows other major Financial sector earnings this month

JPMorgan’s report follows an earnings beat by BlackRock on Tuesday, who reported EPS of $9.22 on revenue of $4.37B, compared to forecasts EPS of $7.73 on revenue of $3.92B.

Jefferies Financial had beat expectations on September 23 with third quarter EPS of $1.07 on revenue of $1.62B, compared to forecast for EPS of $0.34 on revenue of $1.11B.

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