JPMorgan Beats Q3 Estimates, Low Rates Are a Concern

  • JPMorgan Chase posted better-than-expected third-quarter results.
  • The net interest income outlook shows pressure from the lower interest rate environment.

JPMorgan Chase (JPM) posted better-than-expected third-quarter results. The bank’s revenues beat analysts’ expectations due to higher IB (investment banking) revenues. The higher NII (net interest income) in the Cards and Consumer & Business Banking segment also supported the top line.

Stronger-than-expected revenues drove JPMorgan Chase’s bottom line, which continued to increase at a double-digit rate. The earnings beat analysts’ estimates by a wide margin due to share buybacks. JPMorgan Chase shares rose 1.7% in the pre-market session.

While the company’s third-quarter earnings gained due to higher revenues in the Consumer & Community Banking division, the low-interest environment threatens the NII. The Fed’s dovish stance will likely impact banks’ NII. JPMorgan Chase expects its NII to be lower than $57.5 billion in 2019. Previously, the bank expected its NII to be $57.5 billion.

JPMorgan’s third-quarter results

JPMorgan Chase posted revenues of $30.1 billion in the third quarter—up about 8% YoY (year-over-year). The revenues beat analysts’ estimates of $28.5 billion. The revenues in the Consumer & Community Banking segment increased 7% YoY due to higher NII in the Cards and Consumer & Business Banking operations. The division’s average deposit balance increased 3% YoY, while average loans decreased 4%.

The bank’s revenues in the Corporate & Investment Bank segment increased 6% YoY due to higher IB revenues. Increased fees in debt and equity underwriting drove the revenues. However, lower advisory fees and deposit margin compression remained a drag.

The Commercial Banking segment’s revenues fell 3% YoY, which reflected a 5% decline in the NII. Margin compression dragged the NII down. The Asset & Wealth Management segment’s revenues stayed flat.

JPMorgan Chase posted an EPS of $2.68, which rose 15% YoY and beat analysts’ estimate of $2.45 due to higher revenues and the lower outstanding share count.

In comparison, Goldman Sachs (GS) posted mixed third-quarter results. The bank’s revenues were marginally ahead of analysts’ expectation. However, the EPS fell short of the estimate. Goldman Sachs posted an EPS of $4.79, which fell short of analysts’ estimate of $4.81.

Meanwhile, Citigroup’s (C) top line was higher than analysts’ estimate. The EPS crushed the forecast due to the lower outstanding share count and a decline in the effective tax rate. Citigroup posted an EPS of $2.07, which beat analysts’ consensus estimate of $1.95.