JPMorgan Chase (JPM) shares remained muted in premarket trading on Tuesday after the bank reported third-quarter earnings and revenue below analysts’ expectations, marking a rare miss for the Wall Street lender.
The bank reported net income of $15.31 billion, or $5.57 per share, for the quarter.
Excluding $658 million in net securities losses, earnings would have still reached only $5.75 per share, still below the $5.90 expected by analysts surveyed by LSEG.
Net income fell short of the $16.3 billion analysts had anticipated, while revenue came in at $50.9 billion against expectations of $51.7 billion.
Notably, fixed-income markets revenue declined 4% to $5.4 billion, the first such decline in more than two years, reflecting lower revenue from commodities, rates, credit and public finance.
Higher revenue in currencies and emerging markets partly offset the weakness.
The stock first fell during premarket trading but was later up by 0.6%.
Trading revenue growth moderates
JPMorgan’s markets business continued to benefit from active trading, although growth eased from the previous quarter.
Markets revenue, which includes the bank’s equity and fixed-income trading desks, climbed 15% to $10.3 billion.
That represented a slowdown from the 35% year-over-year increase in markets revenue recorded in the second quarter, when the division generated $12.1 billion.
Trading income had risen 20% in the first quarter.
Equity markets revenue increased 49% to $5 billion, but remained below the $6 billion reported in the second quarter, when the segment recorded an 86% year-over-year jump.
Investment banking fees decline sequentially
JPMorgan recorded an 8% decline in investment banking fees from the second quarter, although fees were up 14% compared with the same period last year.
“Investment banking fees each rose at a mid-teens rate, helped by strong levels of client activity, although activity did moderate somewhat during the quarter,” CEO Jamie Dimon said in a statement.
The bank retained its position as the leading earner of investment banking revenue, according to Dealogic data.
The initial public offering market remains selective rather than closed, with delayed offerings potentially returning if market conditions stabilise in the fourth quarter.
Banks earn underwriting fees when companies go public and can generate additional revenue through subsequent share sales.
Rising expenses weigh on results
Companywide expenses reached $27.3 billion, approximately $90 million above analysts’ expectations.
Costs rose 12% year over year, outpacing the 8% increase in revenue and potentially putting pressure on profitability.
Dimon also said JPMorgan reduced share repurchases during the quarter, signalling a more measured approach to returning capital to investors.
“We believe we can deploy this capital over time at very attractive returns for our shareholders,” he said.
Dimon flags economic and geopolitical risks
Dimon said the US economy continued to draw support from business investment and consumer spending but cautioned that several underlying risks remained.
“The US economy continued to be fueled by strong business investment and ongoing consumer spending. However, large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface. These forces may be manageable, but we remain prepared for a wide range of outcomes,” he said.
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