JP Morgan Chase shares rise after bank posts record revenue above Wall Street expectations

J.P. Morgan Chase on Tuesday posted profit and record revenue that exceeded expectations on the strength of consumer banking operations that helped the bank mitigate the impact of lower interest rates.

The bank said third-quarter profit rose 8% to $9.1 billion, or $2.68 a share, exceeding the $2.45 estimate of analysts surveyed by Refinitiv. Revenue also rose 8% to a record $30.1 billion, exceeding the $28.5 billion estimate. The bank cited growth in home loans, auto and credit cards. The stock rose 3.1%.

"The consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels," CEO Jamie Dimon said in the earnings release. "This is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade."

Banks have trailed the broader indexes this year on worries the Federal Reserve's shift to easing rates will squeeze the industry's profit margins. The Fed cut rates twice in the third quarter to avert a slowdown, and banks including J.P. Morgan and Wells Fargo warned last month that net interest income would be lower than earlier guidance.

Still, the bank posted $14.4 billion in third-quarter net interest income, exceeding the estimate of Morgan Stanley's Betsy Graseck by almost $300 million, as J.P. Morgan grew its balance sheet, the firm said.

Despite fears of an encroaching slowdown, the consumer has supported the U.S. economy, borrowing more and largely repaying debts on time. Analysts will scrutinize the bank's charge-offs for any signs of weakness in consumer and corporate borrowing.

"J.P. Morgan has set a pace for bank earnings this quarter that will be very difficult for other banks to match," said Octavio Marenzi, CEO of consultancy Opimas. "While this quarter is expected to be flat in terms of revenue for the industry as a whole, J.P. Morgan's revenue grew by 8% year-on-year, powered by particularly impressive gains in consumer banking, despite the pressure on net interest margins."

Another area that is closely watched is J.P. Morgan's trading desks. WhileDimon said last month that third-quarter trading revenue is expected to climb 10% from a year earlier, that figure is still 10% lower than the bank's results in the second quarter, when it posted $5.2 billion.

The bank exceeded Dimon's guidance on the strength of its bond trading desks: The bank posted $3.56 billion in fixed income trading revenue, beating estimates by more than $300 million. Equities trading posted $1.52 billion in revenue, just under the $1.58 estimate.

Here's what Wall Street expected:

  • Earnings: $2.45 per share, a 4.7% increase from a year earlier, according to Refinitiv.
  • Revenue: $28.5 billion, a 2.4% increase from a year earlier.
  • Net Interest Margin: 2.41%.
  • Trading Revenue: Equities $1.58 billion, Fixed Income $3.19 billion, according to FactSet.

Also Tuesday, Goldman Sachs reported earnings that fell short of estimates.

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