JPMorgan Chase beats by $0.13, misses on revs
Reports Q3 (Sep) earnings of $1.42 per share, $0.16 better than the Capital IQ Consensus Estimate of $1.29; revenues fell 8.1% year/year to $23.12 bln vs the $23.63 bln consensus.
* Including the litigation reserve expense JPM reported net loss of $0.4 bln for Q3. Earnings per share were $(0.17), compared with $1.40 in 3Q12. The Firm's return on tangible common equity for Q3 was (2)%, compared with 16% in the prior year. These figures included legal expense in Corporate of $9.2 billion ($7.2 billion after-tax), and a benefit from reserve releases of $1.6 billion or $0.26 per share ($992 million after-tax). Excluding these items, third-quarter net income would have been $5.8 billion, or $1.42 per share.
Capital
Fortress balance sheet remains strong Basel I Tier 1 common of $145 bln, and ratio of 10.5%; Estimated Basel III Tier 1 common ratio of 9.3%; Estimated Firm supplementary leverage ratio ("SLR") of 4.7%. As planned, resubmitted our capital plan to the Federal Reserve and expect to receive feedback by year-end.
Consumer & Community Banking
- Net income was $2.7 bln, an increase of $347 mln, or 15% compared with the prior year, due to lower provision for credit losses and noninterest expense, predominantly offset by lower net revenue. Net revenue was $11.1 bln, a decrease of $1.6 bln, or 13%, compared with the prior year. Net interest income was $7.1 bln, down $174 mln, or 2%, driven by lower deposit margins, spread compression in Credit Card and Auto and lower loan balances due to portfolio runoff, largely offset by higher deposit balances. - Return on equity was 23% on $46.0 bln on of average allocated capital. - Average total deposits were $456.9 bln, up 10% from the prior year and 1% from the prior quarter. Deposit margin was 2.32%, compared with 2.56% in the prior year and 2.31% in the prior quarter. - Auto originations were $6.4 bln, up 2% from the prior year. - Mortgage originations were $40.5 bln, down 14% from the prior year and 17% from the prior quarter, including purchase originations of $20.0 bln, up 57% from the prior year and 15% from the prior quarter. Mortgage Banking net income was $705 million, an increase of $82 mln, or 13%, compared with the prior year, driven by lower provision for credit losses and noninterest expense, predominantly offset by lower net revenue. Net revenue was $2.0 bln, a decrease of $1.7 billion compared with the prior year. Net interest income was $1.1 bln, a decrease of $44 million, or 4%, driven by lower loan balances due to portfolio runoff. Noninterest revenue was $877 million, a decrease of $1.6 billion, driven by lower mortgage fees and related income. Mortgage application volumes were $40.4 billion, down 45% from the prior year and 38% from the prior quarter.
Corporate & Investment Banking
- Net income was $2.2 bln, up 12% compared with the prior year. Net revenue was $8.2 bln, compared with $8.4 bln in the prior year. Net revenue included a $397 million loss from DVA on structured notes and derivative liabilities; the prior year included a loss from DVA of $211 million. - Banking revenue was $2.9 billion, up 2% from the prior year. Investment banking fees were $1.5 billion, up 6% from the prior year, driven by higher equity underwriting fees of $333 million, up 42% from the prior year, and higher debt underwriting fees of $855 million, up 6% from the prior year, partially offset by lower advisory fees of $322 million, down 17% from the prior year. - Treasury Services revenue was $1.1 billion, flat compared with the prior year. Lending revenue was $351 million, primarily reflecting net interest income on retained loans and fees on lending-related commitments. Markets & Investor Services revenue was $5.3 billion, down 4% from the prior year. - Fixed Income Markets revenue was $3.4 billion, down 8% compared with a strong prior year. The prior year included a modest loss from the synthetic credit portfolio. Equity Markets revenue was $1.2 billion, up 20% from the prior year, driven by broad-based strength across products and regions. Securities Services revenue was $1.0 billion, up 3% from the prior year. Credit Adjustments & Other revenue was a loss of $409 million, compared with a loss of $225 million in the prior year; both periods were predominantly driven by the impact of DVA. Return on equity was 16% on $56.5 billion of average allocated capital (17% excluding DVA1).
Dimon on Litigation Reserves
"While we had strong underlying performance across the businesses, unfortunately, the quarter was marred by large legal expense. We continuously evaluate our legal reserves, but in this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen them. While we expect our litigation costs should abate and normalize over time, they may continue to be volatile over the next several quarters."