Retail Banking Drives JPMorgan Chase & Co. (JPM) Earnings

JPMorgan Chase & Co. (NYSE: JPM) kicked off third-quarter earnings season for U.S. banks on a high note on Friday, reporting an earnings beat on better-than-expected retail banking revenue. An uptick in net interest margin also eased investor fears, and analysts say J.P. Morgan remains among the top U.S. bank stock investments.

JPM stock initally traded higher Friday morning before giving up its gains.

[See: 8 Bank Stocks to Buy for Trump’s Next 2 Years.]

JPMorgan reported third-quarter adjusted earnings per share of $2.34 on revenue of $27.8 billion. Both numbers topped consensus analyst estimates of $2.25 and $27.5 billion, respectively. Revenue was up 5 percent from a year ago.

The revenue beat was driven by the JPMorgan’s consumer and business banking unit, which generated $6.38 billion in revenue, up 18 percent from a year ago. Consumer banking profits were up 60 percent to $4.09 billion.

Average core loans were up 6 percent company-wide, and the company’s provision for loan losses dropped from $1.5 billion a year ago to just $948 million in the third quarter.

Equity trading revenue of $1.6 billion beat analyst estimates of $1.43 billion. Strength in equity trading helped offset a disappointing $2.84 billion in fixed income revenue, which missed consensus estimates of $2.96 billion.

Perhaps the most bullish JPM news from the third quarter is that net interest margin increased by 0.5 percent quarter-over-quarter to 2.51 percent. NIM beat consensus estimates of 2.50 and reassured investors who were concerned about shrinking margins in the second quarter.

“The U.S. and the global economy continue to show strength, despite increasing economic and geopolitical uncertainties, which at some point in the future may have negative effects on the economy,” CEO Jamie Dimon says in a statement.

Bank of America analyst Erika Najarian says the consumer and community banking numbers, including a 5 percent increase in card balances, are a positive sign for JPMorgan.

[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]

“All in all, [consumer and community banking] results affirm our thesis that this segment could continue to be an avenue of continued upside revenue surprise at JPM,” Najarian says

Bank of America has a “buy” rating and $132 price target for JPM stock.

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