JPMorgan Chase (JPM.N) exceeded third-quarter profit expectations, driven by higher borrowing costs and its acquisition of First Republic Bank.
This acquisition led to a record-high income from interest payments.
The bank took on significant consumer loans after rescuing First Republic in May, boosting its net interest income (NII), the difference between loan earnings and deposit payouts.
CEO Jamie Dimon cautioned about geopolitical tensions, such as the Ukraine war and Israel conflict, potentially sustaining inflation at elevated levels.
NII surged 30% to $22.9 billion, even excluding First Republic, it rose by 21%.
JPMorgan raised its NII forecast for the year to $89 billion, up by $2 billion from the earlier estimate, resulting in a more than 3% increase in shares.
However, Chief Financial Officer Jeremy Barnum warned that current NII levels were not sustainable and could moderate to around $80 billion.
The Federal Reserve, though holding interest rates steady, indicated the potential for higher borrowing costs for an extended period.
Investment banking revenue at JPMorgan fell 6% to $1.6 billion due to ongoing economic uncertainty affecting mergers and acquisitions (M&A) and initial public offerings (IPOs).
Despite this, JPMorgan has managed to avoid mass layoffs, with a workforce growth of nearly 3% to 308,669 employees at the end of the third quarter.
The bank’s consumer business remains a key area of growth, particularly in car lending and credit cards. However, this growth may slow down.
JPMorgan also incurred nearly $700 million in legal expenses related to settlements, including one with the U.S. Virgin Islands concerning Jeffrey Epstein’s sex trafficking.
JPMorgan reported a 35% rise in profit to $13.15 billion or $4.33 per share for the third quarter.
Excluding one-time costs, the bank reported a profit of $4.50 per share, surpassing analysts’ expectations.
Executives reiterated their strong opposition to draft rules that would increase capital requirements for large lenders.
If implemented, JPMorgan may need to exit certain businesses, potentially resulting in a $50 billion increase in capital requirements.
Jamie Dimon criticized stricter capital rules, expressing concern that they could hinder economic growth.
In conclusion, JPMorgan posted strong third-quarter results driven by its acquisition of First Republic Bank and higher borrowing costs.
However, concerns about geopolitical tensions and sustainability of NII levels remain, while the bank’s consumer business continues to show promise.