JPMorgan Stock Slumps Despite M&A-Powered Q3 Earnings Beat

JPMorgan blasted Wall Street's third quarter earnings forecasts thanks in part to surging investment banking fees and solid loan growth.

JPMorgan Chase  (JPM) - Get JPMorgan Chase & Co. (JPM) Report posted much stronger-than-expected third-quarter earnings Wednesday as investment banking fees from a record year for mergers and acquisitions powered the bank's bottom line.

JPMorgan said earnings for the three months ending in September were pegged at $11.7 billion, or $3.74 per share, up 28.1% from he same period last year and well ahead of the Street consensus forecast of $3.00 per share. Removing the benefit of a $2.1 reserve release, as well as other one-off items, JPMorgan's first quarter profit was $9.6 billion.

Managed revenues, JPMorgan said, rose 1.7% to $30.44 billion, just ahead of analysts' estimates of a $29.76 billion tally, while net interest income rose 1% to $13.2 billion. Investment banking fees, JPMorgan said, powered a 3% gain for non-interest revenues, which hit $17.3 billion.

Spac deals, gaming takeovers and fintech expansions into 'buy now, pay later' payment firms sparked a record rally in third quarter M&A that lifted the total value of transactions past $1.5 trillion, Refinitiv data noted last month, suggesting global M&A is on pace for its best year since the global financial crisis.

“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," said CEO Jamie Dimon. "We released credit reserves of $2.1 billion, as the economic outlook continues to improve and our scenarios have improved accordingly."

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"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," Dimon added. "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."

JPMorgan shares were marked 2.6% lower in early trading following the earnings release to change hands at $160.93 each, a move that would trim the stock's six-month gain to around 4.4%.

Quarterly average loans, JPMorgan said, were up 5% from last year as activity rebounded from post-pandemic lows, 

"JPMorgan has kicked off reporting season, setting a clearly positive tone for what a bank that executes can deliver," said Credit Suisse analyst Susan Roth Katzke, who carries and 'outperform' rating with a $177 price target on the stock.

"Upside was broad-based, with the trifecta of better revenue, lower than forecast expenses/operating leverage realization, and lower/better provision expense," she added. "Strip out both loan loss reserve release and the tax benefit and "core" ROTE is still at 18% on CET of ~13%."