JPMorgan Chase Earnings Beat Estimates on Lower Loss Provisions

JPMorgan Chase (JPM) said third-quarter earnings rose sharply to beat Wall Street estimates as lower provisions for loan losses more than offset declines in its investment banking and other lines of business.

The nation's second-largest bank by assets after Bank of America (BAC) said third-quarter income rose 23% to $4.4 billion, or $1.01 a share, from $3.6 billion, or 82 cents, in last year's third quarter. Analysts, on average, forecast earnings of 90 cents a share, according to data from Thomson Reuters.

Revenue for the three months ended Sept. 30 slipped to $23.82 billion from $26.62 billion a year ago, which was short of analysts' forecast of $24.57 billion.

Mortgage Losses Are Lower, but Still High

However, JPMorgan was able to set aside less money to cover bad loans, which accounted for the better-than-expected earnings in the quarter. The provision for credit losses was $3.2 billion, down by $6.6 billion, or 67%, from the prior year, the New York bank said.

"We are pleased to report a continued overall decline in credit costs, although our mortgage and credit card portfolios continued to bear very high net charge-offs," Chairman and Chief Executive Jamie Dimon said in a statement. "Our mortgage delinquency trends remained relatively flat compared with the prior quarter, and we expect mortgage credit losses to remain at these high levels for the next several quarters."

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Investment banking revenue fell to $5.4 billion from $6.3 billion a year ago, hurt by lower fees from underwriting stocks, bonds and advising on deals. Revenue from the retail banking business declined 3% to $4.4 billion, hurt by a drop in fees on deposit accounts.

JPMorgan's nonperforming assets totaled totaled $17.7 billion at the end of the quarter, down from the prior-year level of $20.4 billion and the prior-quarter level of $18.2 billion.

"We are not much concerned about actual bank EPS vs. estimates," wrote Thomas Mitchell, an analyst with Miller Tabak, in a note to clients ahead of the bank's earnings report. "Instead, we believe investors will remain heavily focused on trends in credit quality: If non-performing assets decline meaningfully, we believe, the stocks will continue to respond positively to the outlook for further Fed purchases of long-dated Treasury bonds."

Shares in J.P. Morgan, a component of the Dow Jones Industrial Average ($INDU), rose 1% in pre-market trades. For the year-to-date the stock is off about 4%, lagging the broader market by about eight percentage points. See the chart below.