J.P. Morgan Surprises With 3Q Profit Beat Fueled By Capital Markets Boom

J.P. Morgan Chase & Co.’s third-quarter profit blew past the Street’s consensus as a recovery in global financial markets drove trading revenue and amid lower credit costs. Shares are up 1.5% in the pre-market trading session.

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J.P. Morgan’s (JPM) net income increased to $9.4 billion, or $2.92 per share, in the three months ended Sept. 30, from $9.1 billion, or $2.68 per share, a year earlier. Analysts on average had expected earnings of $2.23 per share. Total markets trading revenue surged 30% to $6.6 billion during the same period.

The US bank, with assets of $3.2 trillion, set aside $611 million in credit reserves for the quarter, compared with the $903 million set aside in the same year-ago period.

“The corporate and investment bank [CIB] continues to be a big driver of firm performance. CIB and commercial banking continue to attract and retain deposits given our strong client franchise as our clients remain liquid. Asset & wealth management generated record revenue and net income and saw strong net inflows into long-term products,” J.P. Morgan CEO Jamie Dimon said in a statement. “We maintained our credit reserves at $34 billion given significant economic uncertainty and a broad range of potential outcomes.”

J.P. Morgan shares have been hit hard plunging 27% so far this year as the coronavirus pandemic hurt its businesses. (See JPM stock analysis on TipRanks)

Commenting on the financial results Oppenheimer analyst Chris Kotowski maintained a Hold rating on the stock and said that the good numbers he is seeing are “real”.

“The results seem pretty reflective of underlying operating fundamentals,” Kotowski wrote in a note to investors. “To us the single most important fact is that asset quality remains much more stable than one would have thought in February, March or April.”

The rest of Wall Street analysts are cautiously optimistic on the stock. The Moderate Buy analyst consensus shows 7 Buys versus 3 Holds and 1 Sell. The $111.44 average analyst price target implies 8.8% upside potential over the coming year.