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JPMorgan Chase Kicks Off Earnings Season on a Positive Note

By Matthew Frankel, CFP® - Updated Oct 15, 2019 at 8:08AM

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The largest U.S. bank delivered strong results throughout its business.

JPMorgan Chase (JPM 0.70%) was the first of the major U.S. banks to report its third-quarter results, and despite falling interest rates and the ongoing trade war, the bank's numbers look rather impressive. Not only did the largest U.S. bank surpass expectations for revenue and earnings, but its business as a whole looks very strong. Here's a rundown of the headline numbers, as well as some of the important details of JPMorgan Chase's third quarter that investors should know.

The headline numbers

At first glance, it's not a surprise that JPMorgan Chase's stock price surged after its third-quarter earnings were released. The bank surpassed expectations on both the top and bottom lines.

Crowd of people cheering.

Image source: Getty Images.

The bank generated $30.1 billion in revenue for the three-month period, handily beating analyst estimates of $28.5 billion. And earnings of $2.68 per share was better than the $2.45 the market had been looking for.

Digging into JPMorgan Chase's second quarter

Although beating expectations on both the top and bottom lines is certainly impressive, the headlines don't tell the full story.

Fortunately, JPMorgan Chase's results look quite strong all around. Here are just a few of the most important highlights that investors should know:

  • JPMorgan's total loan portfolio was up by 3% and deposits grew by 5% year over year, a significantly higher growth rate than we saw in the second quarter.
  • Total assets now stand at $2.77 trillion, which is nearly 6% greater than a year ago.
  • Active mobile customers in the consumer banking business rose by 12% year over year. This is significant, as mobile banking is far more cost-effective than providing branch-based services.
  • Also in the consumer banking business, credit card sales and client investment assets both grew 10% from the same quarter last year.
  • Trading revenue has been a weak point lately, but JPMorgan Chase beat expectations in the third quarter. Specifically, fixed income trading revenue of $3.6 billion was 25% higher than a year ago and was well above expectations of $3.19 billion, which more than made up for a slight disappointment on the equities side.

Unfortunately, there's no such thing as a perfect quarter, and this one was no exception. While the good definitely outweighs the bad here, there are a few potentially negative things from the earnings release that investors should know:

  • Return on equity (ROE) for the quarter dropped to 15% from 16% in the second quarter. This isn't a bad ROE by any means (it's likely to be the best out of the big four U.S. banks), but it is worth keeping an eye on.
  • As I mentioned earlier, equities trading revenue slightly missed expectations, $1.52 billion versus $1.58 billion.

A mixed environment for banks

CEO Jamie Dimon discussed mixed economic forces in the company's press release. On the positive side, Dimon pointed out that the U.S. consumer is doing well, wages are growing, consumer confidence is strong, and unemployment is low. On the other hand, he referenced trade tensions and lower business investment as negatives.

To sum it up

In a somewhat difficult environment for banks to grow their business and maintain a high level of profitability, JPMorgan Chase appears to have done just that. While it's very early in earnings season and we have yet to see what happened in the rest of the sector, JPMorgan Chase certainly got things started on a positive note.

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