JP Morgan Chase once again proved it is one of the strongest and best run banks in an industry still suffering from last year’s financial crisis.
The company said today that profits in the third quarter rose to $3.6 billion, or 82 cents a share. Total revenue for the bank rose to $28.8 billion, resulting in record year-to-date revenue.
This beat analyst expectations of profits of 49 cents per share and total revenues around $24 billion. Last year the firm saw profits of $527 million, or 9 cents per share, during the third quarter last year. Its revenue totaled $14.74 billion.
Investment banking and capital markets trading revenue continued to improve, bringing in even more revenue than it did in the second quarter. Advisory fees, however, declined. High unemployment and a still ailing consumer sector hurt the performance of JPM’s credit cards and commercial bank businesses. But even here there are signs of stability.
CEO Jamie Dimon said that while the bank is “seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue.”
Perhaps most importantly, provisions for loan losses have continued to climb. Jamie Dimon noted that the bank is preparing more problems in the credit business. Allowance for loan losses to end-of-period loans retained was 8.44%, compared with 3.62% in the prior year. Nonperforming loans were $4.9 billion, up by $4.5 billion from the prior year and $1.4 billion from the prior quarter.
The results justify, at least in part, the strong run up in financial sector stocks. Shares of JPMorgan rose 28.5 per cent during the third quarter. But the increase in loss provisions may indicate that there still trouble ahead for many of the nation’s banks.
JPMorgan Chase’s investment banking division, which reported a profit of nearly $1.9 billion, up from $1.5 billion last quarter, offsetting the problems from the consumer sector.
It’s a bit hard to remember that less than a decade ago, JP Morgan was considered one of the worst banks on Wall Street. After the dotcom bubble burst, JP Morgan was battered by every new crisis that arose. Its private equity portfolios was overexposed to telecoms and technology companies and its proprietary trading desks always seemed to be on the wrong side of the markets. One joke at the time was that risk management at JP Morgan would be considered laughable except that no one believed it even existed. Loan losses climbed to the point that some on Wall Street joked that you could predict bankruptcies just by looking for who JP Morgan had been lending to. At one point, JPMorgan was one of the few major financial firms whose shares traded below tangible book value.