JPMorgan Chase, Citigroup beat profit estimates
WASHINGTON: JPMorgan Chase & Co and Citigroup comfortably beat Wall Street estimates for third-quarter profit yesterday. JPMorgan Chase, the largest US bank gained from a boom in trading in financial markets and set aside virtually no provisions for loan losses.
JPMorgan is widely seen as a barometer for the health of the broader economy, and its robust performance this quarter bodes well for Bank of America and other large lenders reporting this week. Its shares jumped 1.7 percent in premarket trading.
Citigroup Inc trounced estimates for third-quarter profit yesterday, as this year’s rollercoaster ride for global financial markets drove a surge in the bank’s trading revenue, countering the impact of ultra-low interest rates.
The upbeat results of JPMorgan were driven in part by a huge fall in the reserve provisions it puts aside - just $611 million, compared with the $10.5 billion three months ago, suggesting the bank believes it has taken the bulk of the pain for now for the coronavirus-driven slump.
Trading was another bright spot for the quarter,
even as the pandemic decimated the US economy, with thousands of businesses shutting down and the unemployment rate soaring. The economic fallout of the pandemic has triggered one of the worst recessions in decades. Overall revenue fell slightly to $29.9 billion, but still came in ahead of analysts’ expectations. Revenue from three of its four main reporting lines rose, including trading, which jumped 30 percent to $6.6 billion.
JPMorgan’s net interest income fell 9 percent to $13.1 billion as the US Federal Reserve kept rates at nearly zero to offset the impact of the pandemic. Net interest margin fell to 1.82 percent from 1.99 percent in the previous quarter.
Adding to the bullish message from bumper results from peer JPMorgan, Citigroup reported respectively 18 percent and 15 percent jumps in revenue from bond and stock market trading and its shares rose around 2 percent after the release. With a coronavirus-driven recession crushing consumer and business confidence, and with it demand for loans, Citi reported its first outright fall in revenue this year, down 7 percent to $17.3 billion.
But even allowing for the impact of a $400 million fine related to its mistaken transfer of $1 billion to lenders of Revlon Inc, Citi’s total net income for common shareholders at $1.40 per share beat analysts’ expectations of 93 cents. Analysts from brokerage Oppenheimer calculated that without the penalty, core operating earnings per share would have been $1.55.
The bank, set to exchange long-time Chief Executive Mike Corbat for Wall Street’s first
woman CEO, Jane Fraser, early next year, faces a series of challenges with its retail business as recession grips American households. Profit dropped by more than a third in the quarter as its credit card customers closed accounts and spent less. Revenue in North American branded cards, the growth engine for Citi’s consumer bank going into the year, tumbled 12 percent.End of period open accounts dropped by 4 percent and purchase sales slid 10 percent and expenses rose 5 percent, primarily due to the $400 million fine for risk-andcontrol failures across the sprawling international bank. Executives have committed $1 billion to overhauling its operations systems. — Reuters