Traders Seem Pessimistic Over JPMorgan Stock Despite Better-Than-Expected Earnings Report

Traders Seem Pessimistic Over JPMorgan Stock Despite Better-Than-Expected Earnings Report

JPMorgan Chase & Co opened its intraday on Wednesday at $164.07, down 0.78% from its previous day close of $165.36, despite the investment firm posted third-quarter earnings for the fiscal year 2021 that exceeded the market expectation as the investment bank topped Global Investment Banking fees with 9.4% wallet share YTD which also strengthened its bottom line.

The New-York based investment bank reported total revenue of $30.4 billion whereas the analysts surveyed by Refinitiv expected it to come at $29.8 billion. It posted the credit costs net benefit of $1.5 billion included $2.1 billion of net reserve release and $524 million of net charge-offs. 

The Net income stood at $11.7 billion in the third quarter ended, up by $2.2 billion mainly due to the credit reserve releases of $2.1 billion as compared to credit reserve releases of $569 million in the last year. The current quarter also added an income tax benefit of $566 million received from finalizing the Firm’s 2020 U.S. federal tax return.

Firmwide revenue saw a rise of 2% to $30.4 billion because of the burgeoning fee revenue in the firm’s investment banking and asset and wealth management divisions. Net interest income came in at $13.2 billion, narrowly defeating the StreetAccount estimate of $12.98 billion mainly because of balance sheet growth and higher rates.

Earnings per share came in at $3.74 surpassing the estimate of $3 per share by analysts surveyed by Refinitiv. The current quarter included an income tax benefit of $566 million related to finalizing the Firm’s 2020 U.S. federal tax return.

Jamie Dimon, Chairman and CEO, commented on the financial results: “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. We released credit reserves of $2.1 billion, as the economic outlook continues to improve and our scenarios have improved accordingly. As we have said before, however, we do not consider these scenario-driven releases core or recurring profits. These reserve calculations, while done extremely diligently and carefully, involve multiple, multi-year hypothetical probability-adjusted scenarios, which may or may not occur and which may continue to introduce quarterly volatility in our reserves. Our earnings, not including the net reserve release and an income tax benefit, were $9.6 billion.”

The impact of the announcement on the dashboard of Quantale could be observed as the day proceeds. On Tuesday, social engagement for JPMorgan stock amongst the users of Twitter and Reddit spiked almost 5 percent combined with an increase of 5 percent in the trading volume.

A total of 12.68 million shares of the stock exchanged hands, 1.72 million below the average of 10.96 million. 

Shares of JPMorgan fell roughly 3 % in the initial trading hours, trading at $160. 94. 

Consumer and Community Banking net income improved 12% to $4.3 billion, whereas its net revenue plummeted 3% to $12.5 billion as compared to its previous year performance. Its Consumer & Business Banking net revenue stood at $6.2 billion, up 8% corresponding to the same duration last year, as in this quarter the investment bank saw growth in deposit balances and client investment assets as well as increased debit transactions. 

Home Lending slumped by 8 percent and concluded at $1.4 billion compared to 1.7 billion generated last year because of a decline in net servicing revenue and production margins. Card & Auto net revenue was also reduced to $5.0 billion mainly because of lower operating lease income in Auto and Card, and higher acquisition costs combined with lower net interest income on lower revolving balances.

The Corporate and Investment bank division saw income growth of 29%, settling at $5.6 billion in the third quarter ended as compared to $4.3 billion in the third quarter prior year. Its net revenue came in at $12.4 billion.

Banking revenue stood at $4.9 billion, up 30% from last year’s Q3. Markets & Securities Services revenue tailed off 4% to $7.5 billion, from $7.7 billion recorded in last year’s Q3. 

Market revenue stood at $6.3 billion. Fixed Income Markets revenue declined 20% to $3.7 billion hampered by lower revenue in Commodities, Rates and Spread products as compared with a favorable performance in the prior year.

Equity Markets revenue rose 30% to $2.6 billion mainly due to the strong performance shown across products. Securities Services revenue improved 9 percent to $1.1 billion, largely driven by fee growth.

The Commercial Banking division of the bank attracted a net income of $1.4 billion, up 30%. Net revenue stood at $2.5 billion, up 10%, as it managed to generate higher revenue from investment banking and wholesale payments.

The asset and wealth management business of JPMorgan saw an increase in revenue by 21% to $4.3 billion, owing to greater management fees and bigger deposits. Due to increasing equities markets, assets under management increased by 17% to $3 trillion.

Dimon concluded: “We are making important investments, including strategic, add-on acquisitions that will drive our firm’s future prospects and position it to grow and prosper for decades. This quarter, we became the first bank to have branches in all of the lower 48 states, allowing us to serve more households, businesses and communities across the country. We are more than halfway through our plan to open 400 branches in new markets by the end of 2022, with approximately 30% of these branches in low-to-moderate income communities. We are also expanding our retail presence internationally, most recently launching our digital retail bank in the U.K. We remain committed to using our resources to drive inclusive solutions to support our employees, customers, clients and the communities we serve.”