On Wall Street, few people have done as much to scare investors about a crash as JPMorgan Chase (JPM -0.60%) Chief Executive Officer Jamie Dimon.
At one point last year, Dimon told investors to brace themselves for an economic hurricane. Though the head of the country's biggest walked back those comments later, he's warned investors repeatedly since then, saying as recently as last month that it was a mistake to expect the economy to remain strong.
Although Dimon has been preaching caution, his bank has been delivering stellar results, easily outpacing its Big Four peers over the past year as the chart shows.
Data source: YCharts
That execution was on display again in JPMorgan's third-quarter earnings report.
The banking giant beat estimates on the top and bottom lines with managed revenue jumping 21% to $40.7 billion, ahead of estimates at $39.6 billion. Excluding income from First Republic, whose assets it acquired in the aftermath of the regional banking crisis, revenue was up 15%.
Most of the gains in revenue came from its consumer and community banking division, with a revenue increase of 29%, or 19% without First Republic, to $18.4 billion. Higher net interest income in banking and wealth management was a key driver.
Overall net interest income was $22.9 billion, up 30%, or 21% excluding First Republic, and on the bottom line, earnings per share jumped 39% from the quarter a year ago to $4.33, ahead of the average estimate of $3.96.
Management controlled costs as non-interest expense rose 13% to $21.8 billion and provision for credit losses declined by 10% to $1.4 billion from the quarter a year ago, a sign that the bank is more optimistic about the economy and expects modestly fewer defaults.
The company also saw strong growth in new accounts, with triple the growth of its peers, and consumer spending remained robust with debit and credit card sales volumes up 8%.
Overall, the results show JPMorgan expanding its business in a volatile environment with solid growth in every segment except corporate and investment banking, where revenue fell by 2%.
Image source: Getty Images.
Dimon urges caution
Despite the generally strong results, Dimon was not about to take a victory lap. Instead, he continued to urge caution, citing a number of potential threats on the horizon.
Those included a decline in U.S. consumers' excess cash savings; tight labor markets and high government debt, which increase the risk of inflation remaining elevated and interest rates continuing to rise; the impact of quantitative tightening by the Fed; and geopolitical risks in the war in Ukraine and now the Middle East.
Referencing the wars, Dimon concluded by saying, "this may be the most dangerous time the world has seen in decades."
On the earnings call, Dimon elaborated on his view, saying, "there has been an extraordinary amount of fiscal and monetary stimulus still in the system," but its effects won't last forever. He also added, "My caution is that we are facing so many uncertainties out there."
Why JPMorgan Chase stock is a buy
By now, investors who have followed JPMorgan Chase understand that while Dimon may spook the markets occasionally with his forecasts about economic hurricanes and the like, what he's trying to communicate is that his company is prepared for the worst, and continues to operate with his famous "fortress" principles.
Dimon is well regarded on Wall Street for steering JPMorgan Chase through the great financial crisis, and the bank continues to maintain capital ratios that are among the strongest in the industry.
The JPMorgan chief said his bank does "100 stress tests a week," to prepare for a wide variety of crises.
While any bank stock is sensitive to the overall economy, JPMorgan has outperformed its big bank peers over longer time horizons in addition to besting them this year. The company is reporting solid growth nearly across the board, and Dimon's leadership remains a valuable asset.
Even after the stock's surge this year, it trades at a price-to-earnings ratio of just 9.5 and offers a solid dividend yield of 2.8%.
The bank's dividend has essentially tripled over the past decade from $1.36 to $4.05, and the surge in profit leaves plenty of room for future dividend hikes and cash to be returned to shareholders through repurchases.
The sky isn't falling, and JPMorgan Chase looks well positioned to deliver solid returns for investors no matter what the global economy brings.
You can count on this dividend growth machine to keep cranking out the cash.
