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Here's What Investors Should Know About JPMorgan Chase's Third-Quarter Earnings

By Matthew Frankel, CFP® and Jason Moser – Nov 5, 2021 at 6:47AM

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The megabank had a strong quarter. Here are the highlights.

The third quarter was an interesting one for the banking industry, with interest rates starting to tick upward but several COVID-19 relief programs coming to an end. In this Fool Live video clip, recorded on Oct. 21, Fool.com contributor Matt Frankel breaks down what investors need to know about megabank JPMorgan Chase's (JPM 0.59%) latest results. 

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Jason Moser: What stood out to you and JPMorgan's report? We're always paying a little bit, I think closer attention because of Jamie Dimon, but what stood out to you in JPMorgan's most recent quarter?

Matt Frankel: There are a few common themes among all of these earnings reports, they were all generally good first of all. All five of the banks we're going to talk about beat earnings expectations, which is pretty impressive. There were a lot of reserve releases, which is one of the things we mentioned in the preview show last week if you remember. Banks have more visibility into their loan losses now, now that COVID is, I don't want to say winding down, but definitely we're moving on with life in general.

Moser: We're in a much different place now than we were before and it's much better situation for sure.

Frankel: Right. Just to run down JPMorgan, they had a $2.1 billion reserve release. The reason I'm mentioning that first is because that was a big part of its earnings beat. It beat expectations and it earned $3.74 a share versus $3 EBITDA was the expectation. But over $0.50 of those earnings were in the form of a reserve release. The beat wasn't as good as it sounds, but it was still more than expected.

Revenue grew 2% year over year, which is nice considering that interest rates are still pretty low. Revenue came in higher than expected. Jamie Dimon who you mentioned, gave his thoughts on the economy and said he is really impressed with the economic growth despite the delta variant making us go backwards a little bit during the third quarter. I would call the second quarter really the reopening quarter of the year. Whereas the third quarter, I don't want to say it was a shutdown quarter, but things definitely took a pause a little bit in terms of reopening in August and September.

Moser: Yeah.

Frankel: Interest income was actually better than expected, which is really nice to see. Net interest income came in about $200 million more than expectations called for.

Moser: Wow.

Frankel: Which remember, interest rates are still pretty low. They started to pick up during the third quarter, but still very low historically. In the investment banking side of it, investment banking revenue was up 50% year over year.

Moser: Yeah.

Frankel: That's strong M&A and IPO market that we mentioned during the preview. One potential negative, JPMorgan was the only bank that missed on some of its trading revenue and investment banking. They missed on the fixed income side, they came in well below expectations. They beat on the equities trading sides, so that kind of even that out, but still something to watch. We've talked about it many times, how trading revenue is like the least predictable type of banking income. But in general, overall loan portfolio is up 5% year over year. Jamie Dimon called the loan growth stabilized, which is nice because remember, loans were declining for a little while there. Deposits are up 19% year over year. Overall, really good quarter.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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