JPMorgan Profits Rise 4%, Surprising Demonstration of Coronavirus Resilience

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The bank has only set aside $ 611 million for potential future loan losses, far less than expected and the $ 10.47 billion it recorded in the second quarter. Profit doubled from the second quarter.

The bank’s profit rose to $ 9.44 billion, or $ 2.92 per share, from $ 9.08 billion, or $ 2.68 per share, a year earlier. Analysts had expected $ 2.23 a share, according to FactSet. The smaller reserve build-up indicates that the bank believes it is ready to deal with the losses that will arise.

Still, JPMorgan chief executive James Dimon has warned that the bank’s better-than-expected results could be a temporary setback. A massive expansion in unemployment benefits and other government stimulus has supported U.S. consumers and businesses so far, but they need more help, he said.

“A good, well-designed stimulus package will just increase the chances of getting better results, but there is so much uncertainty that we are not saying it’s final,” Dimon said on a call with journalists Tuesday morning.

If the economy recovers quickly, JPMorgan could have $ 10 billion more than it needs to cover degraded loans, Dimon said. In a double-dip recession, he said, the bank may need an additional $ 20 billion in reserves.

The bank’s forecast for the U.S. economy has improved slightly, but it still expects unemployment to stay above 7% throughout 2021.

The bank’s net write-offs were $ 1.18 billion, down from last year and the previous quarter, indicating that customers are not yet in default on their debts in large number. Banks, including JPMorgan, gave customers widespread payment refunds on credit cards, auto loans and other debts earlier in the pandemic, but many of those grace periods have expired.

Revenue slipped to $ 29.15 billion from $ 29.29 billion a year ago. Analysts had expected it to fall to $ 28.22 billion.

JPMorgan shares have fallen 27% this year. This is slightly better than the KBW Nasdaq Bank index, which is down 29%, but much worse than the market in general. The S&P 500 has rebounded from a crisis in March and is now up about 9% for the year.

Shares rose 1.8% to $ 104.25 in pre-market.

The bank was boosted by its investment banking operations. This year, companies rushed to raise cash, refinance debt, and sell stocks to weather the recession, leading to a boom on Wall Street.

Corporate and investment banking revenues increased 21% to $ 11.5 billion. Profit jumped 52% to $ 4.3 billion. Trading revenue rose 30%, surpassing the 20% increase that CFO Jennifer Piepszak predicted at a conference last month.

In consumer banking, revenues fell 9% to $ 12.76 billion. Profit also fell 9% to $ 3.87 billion, stung by lower interest rates that hurt its loan margins.

The bank set aside $ 794 million to cover potential losses on adjusted consumer loans, up from $ 5.83 billion in the second quarter. This helped the consumer bank recover from a loss in the second quarter.

Profits at the commercial bank rose 15%. In asset and wealth management, profits increased by 31%.

JPMorgan continued to see an increase in deposits during the quarter as nervous customers accumulated cash. Total deposits topped $ 2 trillion for the first time, up from $ 1.525 billion a year ago.

Write to David Benoit at [email protected]

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