JPMorgan Profit Falls Short of Forecasts as Debt Trading Revenue Drops and Investment Banking Momentum Slows

Source link: JPMorgan Profit Falls Short of Forecasts as Debt Trading Revenue Drops and Investment Banking Momentum Slows. JPMorgan Chase, the largest US bank, presents a mixed picture of the country's banking system in its third-quarter financial report. Profit rose from last year but came in below analysts' forecasts. Lower debt trading revenue and signs of a slowdown in investment banking

The third quarter financial report of JPMorgan, the largest American bank, presents a double picture of the state of the country's banking system. The bank's profit increased compared to last year, but it was lower than analysts' forecasts. Declining debt trading revenue and signs of a slowdown in investment banking activities have also raised concerns about continued earnings growth. The negative reaction of the bank's shares before the start of American market trading shows that investors, in addition to the past performance, pay attention to the prospects of profitability in the coming quarters.

JPMorgan's net profit came in at $15.3 billion, but fell short of market expectations.

The bank's adjusted income increased by 8% year-on-year to $50.9 billion.

Fixed income trading revenue decreased 4% to $5.4 billion.

The bank's shares fell by about 3% before the start of American trading; A sign of market concern about the future growth trend.

Higher profitability, but less than expected

JPMorgan posted a net profit of $15.31 billion in the quarter ended September 30; While its profit in the same period last year was about 14.4 billion dollars. The profit per share also increased from $5.07 to $5.57. The bank's reported earnings per share reached $5.57, which was lower than analysts' expectations. Excluding the effect of some investment losses, earnings per share come to $5.75.

However, this figure was lower than analysts' estimate of $5.92. The adjusted income of the bank also reached 50.9 billion dollars, despite the annual growth of 8%, falling short of the forecast of 51.37 billion dollars.

This difference shows that annual growth alone is not enough to satisfy the market; Investors also compare the performance of companies with expectations that are already reflected in stock prices.

One of the weak points of the report was the 4% decline in fixed income trading revenue to $5.4 billion. According to the bank, the decline in income in the commodities, interest rates, credits and general financing sectors was largely offset by the increase in income from currency transactions and emerging markets.

On the other hand, the total income of the financial market trading sector increased by 15% compared to last year; An issue that shows that the weakness in debt securities transactions does not mean a complete decline in the bank's trading activities.

Investment banking fee income also increased by 14% compared to last year and reached 3 billion dollars; However, there was a decrease compared to the second quarter. Slowing down the process of IPOs and large corporate transactions can affect the continuity of these revenues.

"In my opinion, the main point of this report is the gap between earnings accounting growth and the quality of future expectations. JPMorgan continues to enjoy income diversification and significant strength in customer banking and market transactions; But the stock's negative reaction shows that the market is not satisfied with annual growth alone to maintain valuations. The determining criterion in the coming seasons will be the bank's ability to maintain the margin of interest income, compensate for the weakness of the volatile sectors and convert the high activity of the market into a stable income. Therefore, we should consider the stock drop as a review of investors' growth expectations and future risks rather than the final judgment about the bank's health.

Investment costs and the state of the US economy

A net loss of $658 million on investment securities also weighed on the quarter's results, cutting earnings per share by 18 cents, according to the bank. In the segment of customer banking activities, net interest income, excluding market transactions, reached 24.7 billion dollars with a growth of 6%. The average facility also increased by 10% compared to last year; Statistics that indicate the continued demand for credit.

However, the increase in interest rates, the cost of financing and the possible pressure on loan demand are among the factors that can complicate the bank's future path. Jimmy Diman, CEO of the bank, while pointing to the continuation of corporate investment and household consumption, warned about the high budget deficit, permanent inflation, high valuation of assets, rising interest rates and geopolitical tensions.

JPMorgan's third-quarter performance is neither a sign of widespread weakness in the bank's business nor a guarantee of continued profitability growth. The increase in net profit, interest income and trading activities are the strengths of the report; However, the profit and income falling behind the forecasts, the decrease in the income of debt securities transactions and the relative slowdown of investment banking activities have turned the market's attention to the sustainability of growth.

Artificial intelligence has been used to translate some parts of this report.