J.P. Morgan Chase & Co. narrowly missed analyst
estimates for its third-quarter profit Tuesday as higher legal expenses
outweighed an uptick in trading revenue. The bank reported net income of $5.57
billion, compared with a year-earlier loss of $380 million. On a per-share
basis, the bank’s profit was $1.36 a share, compared with a loss of 17 cents in
the same period last year. Analysts polled by Thomson Reuters had expected
earnings of $1.38 a share.
Revenue rose 4.9% to $24.25 billion. Revenue on a so-called
“managed basis,” which compares with analyst estimates, rose 5.4% to $25.16
billion, topping the $24 billion expected by analysts. Shares fell 1.2% in
recent trading.
Legal expenses in the third quarter ticked up to $1.1
billion from $700 million in the second quarter, and Chief Financial Officer
Marianne Lake said that gain is due in large part to foreign-exchange
settlement talks that “further progressed.”
Revenue from fixed-income markets rose 2.1% from a
year-earlier quarter in which the bank gained market share from peers, to $3.51
billion. That is stronger than many analysts were expecting and is likely
indicative of better results from other investment banks reporting this week.
After a string of slumping quarters, U.S. banks are expected to report stronger
fixed-income trading revenue on the heels of more volatility in September.
Equity-markets revenue, which includes stock and
stock-options trading, ticked down 1.4% from a year earlier to $1.23 billion.
Overall trading revenue edged up 1.2% from a year earlier. Mr. Dimon said on an
earnings call that traders across the industry are reducing balance sheets due
to capital and debt costs, in addition to new regulatory requirements. The bank
will continue to increase its use of electronic trading and shift more trading
to clearinghouses, he added.
J.P. Morgan got a leg up from investment-banking fees, which
rose 2.1% from a year earlier to $1.54 billion as strength in advisory and
stock underwriting outweighed a slump in debt capital markets. Advisory revenue
jumped 28% from a year earlier, and equity-underwriting revenue climbed 24%. Debt-underwriting
revenue was a relative dull spot, dropping 16%.
The bank again showed weakness in its mortgage business as
it, like peers, continues to feel the slowdown in refinancing. Mortgage
originations of $21.2 billion were down 48% from the prior year, although these
were up 26% from the prior quarter
J.P. Morgan like most banks has been reining in costs as a
way of making up for sluggish revenue growth, including relocating employees,
revising third-party contracts and re-examining relationships dealing with
costs like the market data.
Click
here to access the full article on The Wall Street Journal.