JPMorgan Chase JPM <span>1.23%</span> & Co. said on Tuesday that its third-quarter profit rose 4%, a surprising result for the country's largest bank during a recession that has greatly affected its business for the year.
The bank set aside $ 611 million for potential future loan losses, which is lower than expected and booked $ 10.47 billion in the second quarter. Profit doubled from the second quarter.
The small reserve build signal bank believes that it is prepared for impending losses.
Yet JPMorgan chief executive James Dimon cautioned that the bank’s better-than-expected results could be a temporary blip. The massive expansion of unemployment benefits and other government incentives has yet to affect American consumers and business, but they require more aid, he said.
“A good, well-designed incentive package will simply increase the chance that we will get better results, but there is so much uncertainty that we are not saying it is certain,” Mr Dimon told reporters on Tuesday morning.
If the economy picks up, JPMorgan may have $ 10 billion more than it needs to cover sour debts, Mr. Dimon said. In the double dip recession, he said, the bank may require $ 20 billion in reserves.
The bank’s forecast for the US economy improved slightly, but it still expects unemployment to be above 7% for all of 2021.
The bank’s net charge was $ 1.18 billion, down from a year earlier and the prior quarter, indicating that a large number of customers are yet to default on their loans. Banks, including JP Morgan, made extensive payments to customers on credit cards, auto loans and other loans earlier in the epidemic, but many of those grace periods have expired.
Revenue declined to $ 29.15 billion from $ 29.29 billion a year earlier. Analysts had predicted it to fall to $ 28.22 billion.
JPMorgan shares have fallen 27% this year. It is slightly better than the KBW Nasdaq Bank Index, down 29%, but far worse than the broader market. The S&P 500 has stalled since the March recession and is now around 9% for the year.
The stock rose 1.8% to $ 104.25 in prepaid trading.
The bank was boosted by its investment banking operations. This year companies have led a Wall Street boom to raise cash, refinance debt and sell stocks for the recession season.
Revenue at the corporate and investment bank grew 21% to $ 11.5 billion. Profits rose 52% to $ 4.3 billion. Trading revenue grew by 30%, with a 20% increase predicted by Chief Financial Officer Jennifer Pipszak at a conference last month.
At Consumer Bank, revenue fell 9% to $ 12.76 billion. Profit also fell 9% to $ 3.87 billion, hit by lower interest rates, which hurt its margins on lending.
The bank set aside $ 794 million in the second quarter to cover potential losses on sour consumer debt below $ 5.83 billion. This helped the consumer bank to recover from losses in the second quarter.
Commercial bank profit increased by 15%. In property and wealth management, profit grew by 31%.
JPMorgan saw an increase in deposits in the quarter, with nervous customers accumulating cash. Total deposits for the first time were above $ 2 trillion, up from $ 1.525 trillion a year earlier.
Write David Benoit at [email protected]
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