JPMorgan Chase reported a 4% decline in revenue from trading bonds, currencies and commodities on Tuesday, exposing a weak spot in its Wall Street business even as stock trading surged and customers kept spending. The mixed third-quarter results showed that growth in one corner of financial markets does not necessarily carry across the bank’s other businesses.
Fixed-income markets revenue totaled $5.4 billion for the three months ended Sept. 30. JPMorgan attributed the decline to weaker results in commodities, interest-rate products, credit and public finance. Stronger currencies and emerging-markets revenue largely offset those declines.
The business helps companies and institutional investors buy and sell securities, exchange currencies and protect themselves against changes in interest rates or commodity prices. Banks earn money through trading spreads, fees, financing and positions they hold. Revenue therefore depends on more than the number of trades: client demand, prices and the performance of different products all matter.
That distinction was clear across JPMorgan’s trading operations. Equity markets revenue jumped 49% to $5.0 billion, led by services for hedge funds and derivatives, contracts used to manage or take exposure to price movements. The gain lifted total markets revenue 15% to $10.3 billion despite the fixed-income decline.
For companies seeking capital, the dealmaking figures offered another mixed signal. Investment banking fees reached $3.0 billion, up 14% from a year earlier, predominantly because of higher advisory fees. But those fees fell 8% from the second quarter, showing that a stronger annual comparison can coexist with slowing recent momentum.
Chairman and Chief Executive Jamie Dimon said client activity “did moderate somewhat during the quarter.” That leaves an important question for the rest of the year: whether companies and investors resume transactions or remain cautious.
JPMorgan’s overall profit rose 6% to $15.3 billion, or $5.57 per share, from $14.4 billion, or $5.07 per share, a year earlier. The reported earnings figure fell short of the $5.85 analysts expected, according to LSEG estimates cited by Reuters.
The results included $658 million in net investment securities losses before tax. The after-tax impact was $498 million. Excluding that item, JPMorgan said earnings would have been $15.8 billion, or $5.75 per share. Those adjusted figures should be distinguished from the profit actually reported.
Reported revenue rose 8% to $50.2 billion. JPMorgan also presented managed revenue of $50.9 billion, a separate measure that adjusts certain tax-exempt income to make it comparable with taxable income.
Expenses increased faster than revenue, rising 12% to $27.3 billion. Higher compensation, additional front-office employees, brokerage and distribution costs, marketing and technology spending contributed to the increase. That spending absorbed part of the benefit from growing revenue.
The consumer business remained stronger. Consumer and community banking earned $5.7 billion, up 13%, while Chase debit and credit card sales volume increased 10%. The bank added more than 650,000 net new checking accounts.
Those figures point to continued activity among Chase customers, though a rise in card spending alone cannot establish how much came from higher prices, increased purchases or changes in the customer base.
Home lending was softer. Revenue fell 3% to $1.2 billion, reflecting lower production revenue, partly offset by higher net interest income. The decline shows that strength in cards and deposits did not extend evenly across household banking.
Credit costs totaled $2.7 billion, down from $3.4 billion a year earlier. JPMorgan nevertheless added $539 million to reserves for possible credit losses, primarily in wholesale lending. Reserve additions anticipate potential losses; they are separate from loans already written off.
Dimon said business investment and consumer spending continued to support the economy, while warning about government deficits, persistent inflation, elevated asset prices, rising interest rates and geopolitical conditions.
The bank also reduced share repurchases, reporting $664 million in net buybacks. Dimon said investing in the business and supporting clients remained its priorities for capital. Common dividends totaled $4.4 billion, or $1.65 per share.
The next test is whether JPMorgan can sustain customer and stock-trading growth while restoring momentum in fixed income and dealmaking. Its third-quarter results leave that unresolved, with expenses rising faster than revenue and management acknowledging that client activity eased.
JBizNews Desk | Wall Street
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