JPMorgan bad debt provisions for pandemic drop as profits exceed targets

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JPMorgan has kicked off a closely watched third quarter earnings season with an increase in trading income and a vast reduction in provisions set aside to deal with the impact of Covid-19.

Its corporate and investment banking was once again a major revenue driver, with the company’s profits rising 4% to $ 9.4 billion, well above analysts’ expectations, according to a consensus of FactSet. Meanwhile, money set aside to cover bad debts – which jumped to $ 10.2 billion in the previous quarter – rose to $ 611 million, down 60% from the previous year.

JPMorgan’s trading revenue rose 30% to $ 6.6 billion, again in line with analysts’ expectations, but well above previous forecasts given by the bank’s executives.

JPMorgan shares gained around 1.4% in pre-market trading on October 13, 1:00 p.m. BST.

Jenn Piepszak, chief financial officer of JPMorgan, had previously reported an increase in trading income, telling a conference in September that the bank expected a 20% increase.

JPMorgan rival Citigroup, which also released quarterly figures on October 13, said its provisions for potential Covid-19 losses were also about half of what analysts expected, at around $ 2.1 billion. dollars.

The bank set aside nearly $ 8 billion in the previous quarter. The lower than expected figure translated into higher than expected profits for the bank on Wall Street.

Citi shares rose about 1.3% in pre-market trading to 13.00 BST.

Banks on Wall Street have relied on a huge increase in business activity to support other parts of the business, which have been affected by the Covid-19 crisis. At JPMorgan, fixed income income was once again a key driver of the overall rise in markets, increasing 29% to $ 4.6 billion, but equity trades were also up 32% to $ 2 billion. of dollars.

“Corporate and Investment Banking continues to be a major driver of business performance with market revenues up 30% and Global IB fees up 9%,” said Jamie Dimon , Chairman and CEO of JPMorgan, in a press release accompanying the results.

JPMorgan’s CIB profits rose 52% to $ 4.3 billion in the first quarter, while its traditional investment banking unit also rose 12% to $ 2.1 billion thanks to an increase debt and equity market activity. Despite a record third quarter for announced M&A deals, consulting revenues still lagged the previous year.

The results follow a three-month record for JPMorgan’s corporate and investment bank in the second quarter, with the bank posting $ 5.5 billion in profit in the unit. At the same time, major lenders have set aside billions of dollars in bad debt provisions for borrowers affected by the coronavirus pandemic.

JPMorgan executives previously suggested second quarter numbers were unsustainable, with chief executive Jamie Dimon telling analysts third quarter earnings would be cut in half and the merchant and investment banking boss Daniel Pinto, telling staff he expected “more normal” earnings at the end of 2020. However, profits were down 21% from the previous three months.

Potential loan losses have continued to weigh on bank profitability, despite a sharp increase in sales, trading and investment banking income so far in 2020. The third quarter reporting season will be closely. watched, as income from the investment banking that has so far supported Wall Street’s overall banking operations is expected to decline across the industry.

To contact the author of this story with comments or news, email Paul Clarke

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