JPMORGAN CHASE produced an uninspiring start to the bank earnings’ season, reporting flat year-on-year earnings after a torrid summer hit investment banking revenues and offset improvements in the consumer business.
JPMorgan chief executive Jamie Dimon described the third-quarter results as “reasonable given the current environment”, and pointed to a significant increase in lending to small and medium-sized businesses as reason for optimism on the economic outlook.
The bank reported net income of $4.3 billion (€3.1 billion), or $1.02 in earnings per share, on revenue of $24.4 billion, down slightly from the same period last year.
JPMorgan is the first of Wall Street’s banks to report earnings at the end of a quarter during which there were sharp falls in financial groups’ stocks as investors worried about the impact of euro zone turmoil. “Our shareholders should rest assured that we are being extremely cautious while navigating through this challenging economic environment,” Mr Dimon said.
JPMorgan stock dropped almost 6 per cent to $31.23 in early New York trading, amid falls for banks such as Bank of America and Morgan Stanley, due to report results next week.
In a perverse accounting effect likely to be repeated at its peers, JPMorgan’s results were flattered by a $1.9 billion debit valuation gain, which comes from pegging the group’s own debt to a lower market valuation. That was partially offset by a $691 million loss related to the “widening of credit spreads for the firm’s counterparties”.
In the past three months, credit default swaps on several of the largest banks have risen to levels not seen since the 2008 collapse of Lehman Brothers.
Citigroup analyst Keith Horowitz said that, stripping out several one-off items, JPMorgan’s results were a “core miss” and “a bit soft across the board”.
Net income at JPMorgan’s investment bank rose 27 per cent to $1.6 billion, although its revenues benefited from accounting adjustments, while investment banking fees fell 31 per cent. – (Copyright The Financial Times Limited 2011)