Global financial services giant JPMorgan Chase (JPM 1.47%)reported financial results for the third quarter last week that beat analyst estimates on both the top and bottom lines. The company reported earnings per share (EPS) of $4.37, beating analyst estimates of $3.99. Total revenue came in at $43.3 billion, surpassing expectations of $41.426 billion.
The quarter was marked by a strong performance in its Corporate & Investment Bank segment, although challenges emerged from rising credit costs and net income pressure. Overall, the quarter showed robust top-line growth yet highlighted areas requiring vigilance, especially regarding credit and income-related pressures.
| Metric | Q3 2024 | Analysts' Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Earnings per share (EPS) | $4.37 | $3.99 | $4.33 | 1% |
| Total revenue | $43.3 billion | $41.43 billion | $40.7 billion | 6.5% |
| Corporate & investment bank net income | $5.69 billion | N/A | $5.03 billion | 13.2% |
| Consumer & community banking net income | $4.05 billion | N/A | $5.9 billion | (31%) |
| Assets under management | $3.9 trillion | N/A | $3.2 trillion | 23% |
| Net income | $12.9 billion | N/A | $13.15 billion | (2%) |
Source: JPMorgan Chase. Analysts consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Overview of JPMorgan Chase's Business
JPMorgan Chase is a leading financial services provider, with operations spanning investment banking, consumer banking, and asset management, among others. Its broad array of services enables it to offer comprehensive financial solutions. The company is organized into four key segments: Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management.
Recently, the company has focused on enhancing its competitive edge through diversification and scaling of its business segments. Key success factors include maintaining a robust capital position, adhering to regulatory requirements, and achieving growth through strategic acquisitions.
Notable Developments During Q3
A significant development in the quarter was the Corporate & Investment Bank segment's strong performance, which saw a 13% increase in net income, reaching $5.7 billion. This was fueled by an 8% rise in net revenue, showcasing the segment's prevalence in the company's earnings.
However, Consumer & Community Banking faced challenges, with net income down 31% year over year to $4 billion. This was due to pressures from deposit margin compression and lower deposit balances, even as credit card service revenue remained strong.
Credit costs rose to $3.1 billion, highlighting the increase in net charge-offs ($2.1 billion) and reserve builds ($1 billion). This indicates a potential future income pressure, particularly in card services where a buildup towards credit normalization has begun.
Asset growth was bolstered by the integration of assets from First Republic Bank (acquired in May 2023), positively impacting the Asset & Wealth Management division. This quarter saw a 23% surge in Assets Under Management (AUM) to $3.9 trillion, reflecting the successful integration of acquired assets into JPMorgan Chase’s portfolio.
Outlook Ahead
Looking ahead, JPMorgan Chase remains optimistic, although pressures from net interest income (NII) compression and higher credit costs loom. Management raised its full-year 2024 guidance for net interest income, saying that NII will be roughly $92.5 billion this year, up from last quarter's $91 billion guidance. The annual expense projection was lowered to $91.5 billion, down from the earlier $92 billion guidance.
Management also hinted at a focus on fortifying its technological infrastructure and client services. The outlook emphasizes readiness to adapt to economic changes, aiming to capitalize on acquisitions like First Republic’s assets to harness growth opportunities.
