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JPMorgan Beats Estimates, but Pressure Mounts (Update 3)

JPMorgan earnings updated with more detail on specific business earnings and management commentary.

  • JPMorgan Chase reported a profit of $4.26 billion, or $1.02 per share.
  • Revenues was flat at $24.36 billion.
  • Analysts expected an EPS of 91 cents per share on revenues of $23.39 billion

NEW YORK ( TheStreet) -- JPMorgan Chase (JPM - Get Report) delivered a mixed third-quarter earnings report Thursday, reporting solid loan growth but a decline in core profitability amid a challenging investment banking and capital markets environment.

The second largest bank by assets kicked off the sector's earnings season, reporting a net income of $4.26 billion or $1.02 per share on a managed basis compared to a year-ago net income of $4.42 billion or $1.02 per share and a second quarter net income of $5.43 billion or $1.23 per share.

Revenues came in at $24.36 billion, a 11% decline from the second quarter revenue of $27.41 billion but little changed from $24.33 billion reported during the third quarter of 2010.

Analysts had expected JPMorgan to report an earnings per share of 91 cents on revenues of $23.39 billion, according to consensus estimates from Thomson Reuters.

Still, the initial reaction to the earnings was lukewarm, given the quality of the beat. The bank reported accounting gain of $1.9 billion, or 29 cents per share, from the decline in the value of its own debt, which helped offset a $542 million pre-tax loss from its private equity business and an additional $1 billion in pre-tax litigation expenses.

Pre-provision profit, a measure of a bank's profitability, fell 11% year-on-year and declined by 16% on a sequential basis. Non-interest expenses increased 8% over the year-ago period to $15.53 billion.

The bank's performance on credit quality was also mixed, with provision for credit losses seeing a 25% decrease over the year-ago quarter but a 33% increase on a sequential basis.

CFO Doug Braunstein said during the conference call with the media that the overall credit story was still positive but that the management remained cautious on trends in home lending. Loan loss reserves remained unchanged during the quarter, reflecting that caution. The bank also said it does not expect significant improvements in the charge-off rates in the near-term.

True to earlier guidance, fees from investment banking declined to $1 billion from $1.9 billion in the second quarter and $1.5 billion in the year-ago period, with revenues declining across its advisory, equity and debt underwriting businesses.
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