For stock markets and investors, the data being released in the run-up to latest earnings seasons hasn’t been ideal.
That has caused a lot of concern over where the next step will be for stocks – is it a leg up or down? As I wrote here earlier this week in “3 Big Things to Watch This Earnings Season”, there are multiple issues on the minds of investors.
There was some relief this week, though when big US bank JPMorgan Chase & Co (NYSE: JPM) reported its third-quarter earnings. Numbers were better than expected.
That was some relief because JPMorgan is generally considered to be an apt bellwether for the broader US economy given how far its business tentacles stretch into every corner of lending/finance in the country.
Following the earnings announcement, the benchmark S&P 500 notched up two consecutive days of solid gains (on Wednesday and Thursday), having fallen around 5% from recent all-time highs.
Net income surges, driven by M&A
For JPMorgan itself, net income surged to hit US$11.7 billion for the quarter. In terms of earnings per share (EPS), JPMorgan’s US$3.74 on that front easily beat consensus expectations of US$3.0.
A big portion of that came from market share gains in the M&A advisory segment (investment banking), where JPMorgan saw its fees almost triple from the year-ago period (see below).
Unsurprisingly, it’s been a key beneficiary of buoyant stock markets and a hunger for dealmaking. Although JPMorgan shares are up nearly 30% so far in 2021, they ironically fell just over 2% in response to its latest results.
While the bank did release an extra US$1.5 billion in bad-loan provisions, helping to provide some shine to that bottom line figure, loan growth did disappoint.
Total loans in its consumer business were down slightly 2% in the third quarter versus the same period a year ago. On the commercial side, total loans were down 5% year-on-year.
While negative for JPMorgan itself, it also highlights how flush with cash both consumers and businesses are unprecedented government stimulus since the start of the Covid-19 pandemic.
For investors looking to navigate the rest of this earnings season, JPMorgan’s latest numbers warrant a “cautiously optimistic” approach to the rest of the year.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.