JPMorgan kicks off bank earnings with a miss

JP

NEW YORK JPMorgan Chase kicked off earnings seasons for banks Tuesday with revenue that fell short of Wall Street’s expectation due to market volatility that rocked investors' confidence in August and September.

The New York bank warned that fourth-quarter revenue could be lower than expected due to continued fallout from the trading rout, which has led JPMorgan's professional investor clients to step back from trading in certain asset classes.

"Volatility is our friend. We were able to capitalize on that," said Chief Financial Officer Marianne Lake in a conference call. But it was "tougher to make money in [fixed-income] and commodities where clients were much less active," she said.

Lake also warned that trading has remained slow this quarter, and suggested expectations should be lowered for the fourth quarter.

"Analysts' estimates appear high," she said.

JPMorgan shares, which lost 0.3% to $61.55 in regular trading, fell another1.4% after hours.

The company earned $6.8 billion, or $1.68 a share, in the three months ended in September, which actually was better than Wall Street expected. But its quarterly revenue of $23.5 billion fell short of analysts' expectations for revenue of $24 billion, according to data from research firm FactSet.

The bank's earnings got a $2.2 billion boost from tax benefits and other write-offs. Excluding those one-time items, JPMorgan earned $5.4 billion, or $1.32 a share

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U.S. banks generally are suffering from historically low interest rates, which are eating into the profits they make on loans. Large banks that make money from the buying and selling of stocks, bonds and commodities — such as JPMorgan and Goldman Sachs — are also being forced to grapple with dampened trading volumes amid fears over rising interest rates and an economic slowdown in China.

JPMorgan's less-than-stellar results kicked off what is expected to be a disappointing earnings season generally for banks. Wall Street analysts expect all the big banks, except for Wells Fargo, to report lower revenue this quarter than they did last year, according to data from FactSet.

Bank of America and Wells Fargo report their third-quarter earnings Wednesday morning. Citigroup and Goldman report on Thursday.

JPMorgan reported markets revenue of $4.3 billion, down 6% amid an 11% drop in fixed-income trading. Equity trading helped offset the loss, however, by bringing in $1.4 billion, up 9% over last year on strong performance in derivatives, JPMorgan said.

JPMorgan's commercial banking unit, which underwrites loans for companies, also suffered a hit amid lowered activity in that area. JPMorgan reported net income of $518 million in commercial banking, down 23% over last year. Revenue in that segment was also down 3% to $1.6 billion.

The bank reported a 23% drop in revenue from its mortgage banking business to $1.6 billion, but it was able to report higher net income in that business of $602, up 20%, on lower costs and increased mortgage orginations.