JPMorgan profits boosted by reserve releases and M&A boom

JPMorgan Chase kicked off Wall Street bank earnings with a big jump in profits driven by a dealmaking boom and the release of $2bn in reserves.

The largest bank in the US on Wednesday reported a profit of $11.7bn, or $3.74 per share, up from $2.92 per share in the same period last year. Analysts had forecast profit to be flat at $9.4bn, according to consensus data compiled by Bloomberg.

JPMorgan reported revenues of $30.4bn for the quarter, up from $29.9bn a year earlier and ahead of analysts’ forecasts for $29.9bn. 

“JPMorgan Chase delivered strong results as the economy continues to show good growth — despite the dampening effect of the Delta variant and supply chain disruptions,” Jamie Dimon, JPMorgan chief executive, said in a statement.

The bank released $2.1bn in reserves it had set aside at the outset of the pandemic to cover potential loan losses that have so far been much less severe than expected. Net income excluding the reserve release and an income tax benefit was $9.6bn.

JPMorgan’s provisions, which hit a peak of $34.3bn last year, now stand at $20.5bn, above pre-Covid levels of $14.3bn.

Earnings were also boosted by fees from wealth management and investment banking, which picked up the slack from a slowdown in bond trading.

Investment banking revenue was up 45 per cent year on year to $3bn, exceeding analysts’ forecasts for $2.7bn. Investment banks are raking in record sums from fees thanks to a rush of dealmaking.

The bank reported signs of loan growth, with total loans in the quarter rising 6 per cent year on year to $1tn, close to analysts’ forecasts.

Loan growth has been sluggish in 2021 as large companies still have cash left over from large capital raises in 2020 and consumers use government stimulus money to pay down debt.

The growth largely came from loans from the bank’s asset and wealth management division, which were up 20 per cent. Commercial lending was down 11 per cent year on year.

Dimon, speaking at the Institute of International Finance conference on Monday, said the bank was “starting to see a little bit of loan growth in certain areas”. 

“I would be optimistic for next year because we’re going to hit a more normal economy,” Dimon said.

Expenses rose 1 per cent year on year to $17.1bn, with costs emerging as a “wild card” for bank earnings this quarter. JPMorgan maintained its target for firm-wide expenses to come in at around $71bn for the full year.

JPMorgan is the first large US bank to report earnings, with the likes of Bank of America and Goldman Sachs scheduled to post results later this week.

JPMorgan shares were up around 0.5 per cent in pre-market trading.

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