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Trading Weighs Heavily on JPMorgan Chase’s 3Q17 Performance

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Core banking

JPMorgan Chase (JPM) beat its earnings per share (or EPS) estimates of $1.65 in 3Q17, posting EPS of $1.76. The banking giant saw strong growth in core banking, card sales, and its Asset Management division. This growth was partially offset by a subdued decline in advisory services and a steep decline in trading revenues due to a decline in its fixed income trading.

JPM’s diversified earnings allowed it to post growth amid fluctuating market and securities revenues due to trading activity. On a YoY (year-over-year) basis, JPMorgan Chase’s revenues and net income increased 3% and 7%, respectively, to $26.2 billion and ~$6.7 billion. Its EPS of $1.76 grew 11% YoY and fell 3% sequentially.

Among other commercial banks (XLF), Citigroup (C) beat estimates. Wells Fargo (WFC) and Bank of America (BAC) have yet to report their results. Overall, banks are expected to see a decline in trading revenues mostly due to fixed income trading.

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Management’s view

In its press release on October 12, JPMorgan Chase’s chairman and CEO, Jamie Dimon, said, “JPMorgan Chase delivered solid results in a competitive environment this quarter with steady core growth across the platform. And for the first time, the Firm led the nation in total U.S. deposits, as consumers and businesses continue to view us as their partner of choice.”

Loans and deposits rise

JPMorgan Chase posted revenues of $25.3 billion and managed revenues of $26.2 billion in 3Q17. The bank saw strong growth in loans and deposits of 9% and 8%, respectively, on a year-over-year basis.

The bank’s Investment Banking division maintained its lead with an 8.2% share in total investment banking revenues. It returned $4.5 billion to shareholders through dividends and repurchases, similar to the previous quarter’s payout.

JPMorgan Chase’s book value per share grew 5% to $66.95 with a Basel III tier 1 capital ratio of 12.5% and equity of $187.0 billion.

In this earnings series, we’ll examine JPMorgan Chase’s (JPM) performance across its divisions, as well as its outlook for future performance, shareholder payouts, and valuations.

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