ii view: lots to like at JP Morgan after forecast beat

Third-quarter results to 30 September 

• Revenue up 6% to $43.3 billion
• Net income down 2% to $12.9 billion
• Earnings per share up 1% to $4.37
• Quarterly dividend up 9% from Q2 to $1.25 per share

Chief executive Jamie Dimon said:

“We await our regulators’ new rules on the Basel III endgame and the G-SIB surcharge as well as any adjustments to the SCB or CCAR. We believe rules can be written that promote a strong financial system without causing undue consequences for the economy, and now is an excellent time to step back and review the extensive set of existing rules. 

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse.”

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ii round-up:

US banking giant JPMorgan Chase & Co (NYSE:JPM) today detailed quarterly revenue and earnings which beat Wall Street estimates, aided by better-than-expected net interest income (NII). 

Third-quarter earnings per share rose 1% from a year ago to $4.37, helped by 3% growth in NII to $23.5 billion alongside loan growth at its credit card business. Analysts had hoped for $4 per share, with the 6% improvement in revenue to $43.3 billion exceeding forecasts of $41. 6 billion.  

Shares in the Dow Jones company rose 5% in US trading having come into this latest news up around 25% year-to-date. That’s similar to rival Citigroup Inc (NYSE:C) and comfortably ahead of a 12% gain for the Dow Jones itself.

Headquartered in New York, JP Morgan employs around 300,000 people globally. Non-interest related revenues across the bank climbed 17% to $12.7 billion, fuelled by higher asset management and investment banking fees as well as reduced investment security losses.

Group-wide provisions for credit losses totalled $3.1 billion, unchanged from the prior second quarter but up from the $1.4 billion reported a year ago.  

JP Morgan’s capital cushion, or CET1 ratio of 15.3% compared with 14.3% last year. Assets under management at its Wealth division climbed 23% to $3.9 trillion, aided by net fund inflows and higher markets.  

The bank previously declared a quarterly dividend of $1.25 per share, up 9% on the prior second quarter. JP Morgan fourth-quarter and full-year results are scheduled for 15 January. 

ii view:

Tracing its history back to 1799, JP Morgan today competes against rivals including Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC). During 2023, North America generated its biggest slug of revenues at 78%, followed by the combined Europe, Middle East and Africa region at 13%, and Asia Pacific most of the balance at 7%.

For investors, accompanying management comments flagging geopolitical tensions are not to be ignored. Higher wages remain a factor in pushing up group costs. Competition across the sector continues to be intense. CEO Jamie Dimon will be a tough act to follow when he moves on, while an estimated price-to-net value of around 1.9 times sits comfortably above many rivals, suggesting the shares are not cheap. 

To the upside, the benefits of a diversified business model have regularly seen strong conditions for one area countering challenges at another. Elevated interest rates have assisted overall revenues given the push to NII. The bank's finances remain robust given a CET1 ratio of over 15%, while a forecast dividend yield of around 2.2% is not to be ignored.   

In all, and while banking will always be a risky business, this mammoth of the US financial sector looks to remain worthy of its place in many diversified investor portfolios. 

Positives: 

• Business diversity
• Robust balance sheet

Negatives:

• Economic outlook uncertainty
• Heightened costs

The average rating of stock market analysts:

Buy