Stock in the bank, a bellwether for the industry, was up $2.55 a share, or 2.2%, in premarket trading.
JPMorgan (ticker: JPM) is significant, to say the least. The company has more $2.6 trillion in assets on its books, $2.2 trillion in client assets in its wealth-management division, almost $1 trillion in loans outstanding, and a market value of about $375 billion. (It operates 5,000 branches, too.)
Morgan’s results matter for the entire economy. The latest set show that the lender is healthy and that consumers are holding their ground despite a tougher economic climate.
“In the U.S. economy, GDP growth has slowed slightly. The consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels,” said CEO James Dimon in the news release disclosing the results. “This is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade.”
The bank reported $2.68 in per-share earnings from $14.2 billion in net interest income. Wall Street had expected $2.45 a share and $14.1 billion net interest income, respectively. Credit quality—measured by loan charge-offs and allowances for bad loans—was stable, but total loans declined slightly.
“JPMorgan Chase delivered record revenue this quarter, demonstrating broad-based strength and the resilience of our business model despite a more challenging interest-rate backdrop,” said Dimon.
Credit Suisse analyst Susan Katzke was pleased with the results, saying the strong performance was due to several factors, including better revenue—and lower credit costs—than expected.. “Bottom line–as solid as one expects from JPMorgan,” wrote Katzke in a Tuesday morning research report.
Interest-rate spreads—the difference between the bank’s borrowing costs and lending rates—narrowed during the third quarter. That is not a surprise to investors, though. The U.S. 10-year Treasury yield is down to about 1.5%, falling from about 3% a year ago.
The lower spreads haven’t hurt the stock. JPMorgan stock is up 19% year to date, better than the 15% change of the
Dow Jones Industrial Average.
In fact, most so-called money center banks—the largest U.S. financial institutions—have beaten the market so far in 2019 despite low interest rates and a flat yield curve.
Starting valuation multiples have something to do with that. Even after its year-to-date gain, JPMorgan, for instance, trades for about 11 times estimated 2020 earnings, a steep discount to other stocks in the Dow.
Write to Al Root at email@example.com