Chase & Co.’s third-quarter profit dropped 17% as the bank built up its defenses for a potential recession and took a nearly $1 billion loss on securities it held.
The nation’s biggest bank’s revenue rose 10% to $32.72 billion thanks to higher interest rates, strong Wall Street trading performance and continued consumer spending. Analysts had expected $32.12 billion, according to FactSet.
But with Chief Executive
Jamie Dimon
warning a U.S. recession is likely in the next six to nine months, the bank set aside an additional $808 million for potential loan losses, part of $1.5 billion in total credit costs. A year ago, the bank had been reducing its reserves for potential loan losses, pulling out $2.1 billion as it said the pandemic was moving to the rearview mirror.
That swing in reserves sent profit falling in the latest quarter, down to $9.74 billion, or $3.12 a share, from $11.69 billion, or $3.74 a share, a year ago. Analysts had been looking for $2.90 per share.
The bank also booked $959 million in losses on investment securities from sales of U.S. Treasurys and mortgage-backed securities.
In the consumer bank, revenue rose 14%, boosted by higher margins on loans, which rise when interest rates rise. Its profit was flat from a year ago, as actual loan losses rose in consumer lending.
Spending on credit cards rose 17% from a year ago and loans on cards were up 19%. Despite the talk of a potential recession, the bank has said consumers have shown little sign of slowing down spending.
The bank’s net-interest margin, the difference between what it pays for deposits and what it charges for loans, increased to 2.09% from 1.8% in the second quarter.
In the corporate and investment bank, revenue fell 4% and profit dropped 37%. A steep drop in fees for advising on mergers and stock and debt sales dragged down a solid quarter in trading, where revenue was boosted by volatile markets.
Advisory fees fell 47% from a year ago. Trading revenue rose 8%, with fixed-income trading up 22% and equities trading down 11%.
Total loans rose 7%, with the commercial bank in particular sporting growth across its clients. But mortgage and auto originations tumbled 71% and 35%, respectively.
Deposits were flat from a year ago. A decline in corporate deposits offset an increase in the funds consumers socked away.
JPMorgan shares rose more than 1% in premarket trading Friday. The stock has lost nearly a third of its value this year, falling back to levels it last traded at in November 2020.
Write to David Benoit at [email protected]
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