(Reuters) – JPMorgan Chase & Co JPM.N Executives are cautiously optimistic that the coronavirus pandemic will not drag the economy into the worst possible spin, and feel confident enough in the bank’s financial position to start repurchasing stocks again soon if regulators allow it. .
Their comments came on Tuesday after JPMorgan reported much stronger-than-expected third-quarter results, beating earnings estimates and setting aside relatively little money for loan losses.
Only one of its four main units – the consumer bank – has seen its revenues and profits decline, and even those customers are holding up relatively well, said CFO Jennifer Piepszak. Other businesses, including trading, investment banking, commercial lending and wealth management, posted gains.
While JPMorgan expects loan losses to increase and add an additional $ 611 million to its loan loss reserves, that figure is small from the previous quarter and lower than many analysts had expected.
JPMorgan has the financial means to handle those losses and start repurchasing stocks again if regulators allow it, chief executive Jamie Dimon said. The Federal Reserve has ordered the big banks to stop buyout programs and limit dividends until the end of the year.
“We will be patient, but we have a tremendous amount of resources to do both when the time comes,” he said. “And hopefully we’ll be allowed to do that before the stock is much higher.”
JPMorgan shares fell 1.8% to $ 100.57 in morning trading. The title is down 27.4% since the start of the year.
As the largest US bank and one of the world’s largest lenders, JPMorgan’s results are considered a barometer of the economy and financial markets.
Its profit rose 4% to $ 9.4 billion, or $ 2.92 per share, in the third quarter, from $ 9.1 billion, or $ 2.68 per share, in the period l ‘last year.
Analysts had expected its earnings to decline, with a consensus estimate of $ 2.23 per share, according to Refinitiv.
JPMorgan’s revenue edged down to $ 29.9 billion, but still exceeded expectations.
Trading was a glimmer of hope for the third consecutive quarter as market volatility pushed volumes up. Revenue there jumped 30% to $ 6.6 billion.
Analysts applauded the results. Glenn Schorr of Evercore ISI called JPMorgan “the Rickey Henderson of the banks,” a reference to a famous Major League Baseball star.
“JPMorgan had a quarter as strong as we could have hoped,” he wrote in a note to clients.
Leaders were careful not to offer too sunny an outlook, especially since Congress failed to pass another stimulus bill. Lockdowns intended to prevent the spread of the virus have put millions of people out of work and closed thousands of businesses, causing the worst recession in decades.
JPMorgan is examining a range of possible economic outcomes when building reserves, executives said. If her “base” case improved from the second trimester, it could very well deteriorate again.
“There is so much uncertainty,” Dimon said. “If better results happen, we’re overbooked by $ 10 billion. If the double dip happened, we would be under-booked by $ 20 billion. “
So far this year, JPMorgan has added $ 19.4 billion to its provisions for credit losses, more than four times the comparable figure for 2019.
Low interest rates are predictably hurting JPMorgan’s results as the U.S. Federal Reserve keeps rates near zero to offset the impact of the pandemic.
JPMorgan’s net interest income fell 9% to $ 13.1 billion in the third quarter and its net interest margin fell to 1.82%. These measures are closely watched by investors to show how much central bank rate policies affect income and how well banks manage their balance sheets.
JPMorgan kept its forecast for full-year interest income at around $ 55 billion, but said adjusted annual spending would be around $ 66 billion, worse than its previous forecast of $ 65 billion.
JPMorgan results contrast with those of Citigroup Inc CN, which also posted profits on Tuesday. Citigroup topped analysts’ estimates, but executives offered a less optimistic economic outlook, especially for its consumer activities.
Goldman Sachs Group Inc GS.N, Wells Fargo & Co WFC.N and Bank of America Corp BAC.N are expected to release their results on Wednesday, with Morgan Stanley MS.N Thursday.
Reporting by Noor Zainab Hussain in Bengaluru and David Henry in New York; Written by Anirban Sen and Lauren Tara LaCapra; Editing by Saumyadeb Chakrabarty and Nick Zieminski