UPDATE: This article, originally published at 4:56 p.m. on Oct. 13, 2015, has been updated with comment from an earnings call with analysts.
NEW YORK (TheStreet) -- JPMorgan Chase (JPM - Get Report) posted lower profit than analysts estimated after revenue in both consumer and commercial banking businesses declined in the three months through September.
The New York bank's third-quarter profit of $1.32 a share lagged behind the $1.37 average estimate from analysts, while sales of $23.5 billion came in under an estimate of $23.7 billion.
For finance companies, "the earnings expectations have been taken down so greatly that if you miss, you are going to be punished -- particularly on the revenue numbers," JJ Kinahan, chief market strategist with TD Ameritrade, said before the bank released its results.
Net revenue in the community banking unit dropped 4% to $10.9 billion, as sales declined in consumer banking and income dropped 6% in the card, commerce solutions and auto segment, the bank said in a statement. In commercial banking, revenue fell 3% to $1.6 billion amid tighter yields on loans and deposits and a decline in investment banking sales.
JPMorgan was the first of the universal banks to report third-quarter earnings, and its performance may be an indication of how the others will perform, particularly in trading businesses. The bank's equity-trading revenue climbed 9% while revenue from fixed income, currencies, and commodities trading declined 11% from a year earlier. The net result was a 6% drop in trading revenue for the quarter.
"We had decent results," CEO Jamie Dimon said in the statement. "We saw the impact of a challenging global environment and continued low rates reflected in the wholesale businesses' results, while the consumer businesses benefited from favorable trends and credit quality. Overall, our risk management discipline and diversified platforms across the businesses are serving us well."
On a net basis, including $2.2 billion in tax benefits and a $1 billion firm-wide legal expense, net income climbed 22% to $6.8 billion, the bank reported.
"The third quarter is typically a seasonally slow quarter, but we believe that the third quarter was even slower than a normal third quarter, and the increased volatility in the quarter froze capital markets activity," KBW analyst Chris Mutascio said of trading activity in an earnings preview.
CEO Jamie Dimon said in a conference last month that an "abnormal, volatile, violent" August would weigh on the bank's trading revenues as clients opted to keep cash on the sidelines. Dimon acknowledged that trading revenue was likely to drop in a range comparable to the bank's peers, which reported declines of 5% to 6% from the third quarter of 2014.
While investors were eager to hear what the bank reported this quarter, they're also interested in the effects of ongoing concerns such as interest rates remaining low for an even-longer period, a seeming market slowdown, and falling oil prices.
JPMorgan originally projected that the Federal Reserve might raise interest rates in September -- for the first time in nine years, though Dimon said last month that the frenzy surrounding the first hike was "a lot of chatter around nothing," since most of the impact was already priced in. Still a return to a normal rate environment is expected to help the bank's net interest margin, which was 2.09% last quarter compared with 3% at the end of 2008.
"We don't get overly focused on exactly when rates are going to rise or how they're going to rise," CFO Marianne Lake said on a call. "We're running the company for the medium and long term and so we're more interested in them rising because that would be showing signs of both the U.S. and global recovery."
"We would say the U.S. economy is doing pretty well," Lake said. "We're seeing good demand for loans in the consumer space, and reasonably good sentiment in the business banking space, and our core loan growth numbers do show that."
As for how the bank re-evaluates its loan portfolio to account for the effects of falling oil prices on energy clients, Dimon said JPMorgan conducts stress tests that measure, for example, the effects of oil prices dropping to $30 for 18 months.
A prolonged period of $30 oil would mean that the bank would have to add a half billion to its reserves, he said in September. Even at that level, though, "you want to lend to those companies because you want to keep these companies alive and doing what they're supposed to be doing."
It's a position he reiterated on Tuesday's earnings call.
"That's what we're here for, to lend to clients, particularly in tough times," Dimon said. "You can't be a bank that every time something goes wrong, you run away from your client."