JPMorgan less worried on loans as trading booms

A woman passes by a JPMorgan Chase bank in Times Square in New York City, U.S.

JPMorgan Chase & Co JPM.N comfortably beat Wall Street estimates for third-quarter profit on Tuesday as the largest U.S. bank gained from a boom in trading in financial markets and set aside virtually no provisions for loan losses.

JPMorgan is widely seen as a barometer for the health of the broader economy, and its robust performance this quarter bodes well for Bank of America BAC.N and other large lenders reporting this week. Its shares jumped 1.7% in premarket trading.

The upbeat results were driven in part by a huge fall in the reserve provisions it puts aside – just $611 million, compared with the $10.5 billion three months ago, suggesting the bank believes it has taken the bulk of the pain for now for the coronavirus-driven slump.

Trading was another bright spot for the quarter, even as the pandemic decimated the U.S. economy, with thousands of businesses shutting down and the unemployment rate soaring. The economic fallout of the pandemic has triggered one of the worst recessions in decades.

Overall revenue fell slightly to $29.9 billion, but still came in ahead of analysts’ expectations. Revenue from three of its four main reporting lines rose, including trading, which jumped 30% to $6.6 billion.

Strong growth from capital markets and investment banking helped offset declines in its consumer business.

Consumer banking revenue fell 9% to $12.76 billion, hurt mainly by lower interest rates. However, provision for credit losses fell to $794 million, driven mainly by a stronger performance from its cards business.

JPMorgan’s net interest income fell 9% to $13.1 billion as the U.S. Federal Reserve kept rates at nearly zero to offset the impact of the pandemic. Net interest margin fell to 1.82% from 1.99% in the previous quarter.

The lender maintained its forecast for full-year interest income at about $55 billion. It also said adjusted expenses for the full year will be up to $66 billion, worse than its forecast of $65 billion three months ago.

Metrics such as net interest margin are closely watched by investors to show how much central-bank rate policies are affecting income, and how well banks are managing their balance sheets.

The bank’s net income rose to $9.44 billion, or $2.92 per share, in the quarter ended Sept. 30, from $9.1 billion, or $2.68 per share, a year earlier.

Analysts on average had expected earnings of $2.23 per share, according to Refinitiv.

Citigroup Inc C.N reports later on Tuesday, followed by Goldman Sachs Group Inc GS.N, Wells Fargo & Co WFC.N and Bank of America Corp BAC.N on Wednesday and Morgan Stanley MS.N on Thursday.

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