JPMorgan Chase & Co. (NYSE: JPM – $67.88), the largest U.S. bank by assets, reported a profit of $6.29 billion, or $1.58 a share, propelled by the company’s investment banking segment. That compares with a profit of $6.8 billion, or $1.68 a share, in the year-earlier quarter when the bank benefited from a one-time $2.2 billion tax benefit. Analysts had pegged earnings of $1.39 a share. Adjusted revenue rose to $25.51 billion vs. Street expectations of $24 billion. The investment banking business posted a 15% rise in fees thanks in part to a 38% bump in equity underwriting revenue. JPMorgan’s trading revenue rose by one-third to $5.75 billion. The bank said a spur of activity tied to the U.K.’s June vote to leave the European Union, central bank actions and money market fund reform caused fixed income trading revenue to rise 48%. Equity trading revenue was roughly unchanged at $1.41 billion. The money-center bank extended $27.1 billion in mortgages in the quarter, a decrease of 9.3% from a year ago, but revenue in its mortgage division, the second-largest in the U.S. by volume, was up 21%. Consumer & Business Banking net revenue was $4.7 billion, up 4% from a year ago, reflecting strong deposit growth.
Chase set aside $1.27 billion in the third quarter to cover loans that could potentially turn bad in the future, an increase of 86% from a year earlier. The bank said the increased reserves were necessary to support its loan growth, up 10% from a year ago, as well as higher expected losses in its credit-card and other portfolios. In spite of the overall solid performance for the quarter, an important measure of JPMorgan’s profitability, its return on equity, was stagnant at 10%.
JPMorgan’s strong market shares in consumer banking, mortgage, credit cards and investment banking ought to serve it well through late decade. An impending rate hike by the Fed will help profits, too. The stock’s dividend yields an attractive 2.8% and positions can be held in a well-diversified aggressive account.