42 2GM Wednesday October 14 2020 | the times
Business
America’s largest bank has recovered
more quickly than expected from the
depths of the coronavirus pandemic,
suggesting that the economy in the
United States is in better shape than
had been thought.
JP Morgan unveiled a surprise profit
increase yesterday in a third-quarter
report that beat Wall Street’s forecasts
across the board. It also set aside much
less than predicted to cover a likely
wave of loan defaults resulting from the
pandemic.
The $310 billion bank has a large
consumer lending division and big
trading, investment and corporate
banking operations, making it a bell-
wether for the health of the American
economy, the world’s largest, and con-
ditions in financial markets globally.
In the second quarter, JP Morgan set
aside $10.5 billion to cover bad loans.
Analysts had expected the bank to set
aside a further $2.4 billion in the third
quarter, but it said that it had ear-
marked only $611 million more.
However, downbeat remarks by
bank’s management about uncertainty
in the US economy took some gloss off
the strong performance. Jamie Dimon,
64, its chairman and chief executive,
said that a “good, well-designed” fiscal
stimulus package from Washington
JP Morgan profits rise
in a quickfire recovery
James Dean US Business Editor was needed to “increase the chances
that we’ll have better outcomes... But
there’s so much uncertainty.”
Third-quarter trading revenue
jumped by 29 per cent year-on-year to
$7.8 billion. Traders generally benefit
from market volatility, which remained
elevated in the third quarter — if not as
extreme as it had been in the second,
when there were record swings.
Corporate banking revenue climbed
by 6 per cent to $3.7 billion. Revenue at
JP Morgan’s consumer bank fell by
9 per cent to $12.8 billion, as ultra-low
interest rates squeezed profit margins
on loans.
JP Morgan’s third-quarter profit of
$9.4 billion was about a third higher
than analysts had expected and was an
improvement on last year’s $9.1 billion.
Revenue fell by less than forecast to
$29.1 billion from $29.3 billion.
The bank’s results marked the
unofficial start to the third-quarter
earnings season in the US, which
covers the recovery from the depths of
the economic slump triggered by
Covid-19. Analysts at Oppenheimer
said that the results represented “a
very positive start to bank earnings
season”.
Citigroup, America’s fourth largest
lender, also reported its third-quarter
results yesterday. It set aside a further
$2.3 billion for bad loans, having put
away $7.9 billion in the second quarter.
Its third-quarter profit slumped by
34 per cent compared with the same
period last year to $3.2 billion, as
revenue declined to $17.3 billion from
$18.6 billion.
Before JP Morgan and Citigroup
reported, analysts had pencilled in
about $10 billion of overall third-
quarter bad loan provisions for the
American banking sector’s so-called
Big Four. The banks are now expected
to undershoot this figure. In the first
half of the year, the quartet combined
set aside $52 billion for bad loans.
In the second quarter, Wells Fargo,
the third largest US bank, reported its
first quarterly loss since the financial
crisis 12 years ago. Wells is scheduled to
report today, as will Bank of America,
the second largest lender.
Shares in JP Morgan fell 1.6 per cent,
or $1.76, to $100.78 in New York last
night. Citigroup’s shares closed 4.8 per
cent, or $2.20 lower, at $43.68.T
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6 There is “more upside than down-
side” in stock markets, the boss of the
world’s largest money manager said
yesterday. Larry Fink, 67, chairman and
chief executive of Blackrock, said loose
monetary policy and an imminent,
large round of fiscal stimulus in the US
meant investors were under-invested.
He spoke after Blackrock reported a
22 per cent rise in third-quarter profit.