JP Morgan Chase posted earnings this quarter that beat analysts’ estimates for top and bottom lines, demonstrating strength to withstand the economic turmoil in the U.S.
According to CNN Business, the nation’s largest bank unexpectedly grew its profits in the third quarter. JP Morgan blew away expectations by reporting a $9.4 billion profit during the third quarter, which is a 4 percent increase from the year prior. Per-share profit jumped to $2.92, easily topping estimates.
JP Morgan’s profits last year came in at $9.08 billion, or $2.68 a share. According to FactSet, it was only supposed to grow to $2.23 a share but far surpassed that expectation.
JP Morgan generated $29.94 billion in revenue, roughly $1.5 billion more than what analysts had predicted for the firm. According to CNBC, the revenue was generated in part by better-than-projected trading results.
The bank set aside only $611 million for potential future loan losses, far less than was expected from them and the $10.47 billion it had set aside in the second quarter.
In the first two quarters, JP Morgan added more than $15 billion to loan loss reserves. The reduction of $569 million in set-asides during the quarter was attributed to a runoff in its mortgage portfolio.
JPMorgan Chief Executive James Dimon was careful to caution Americans not to take the bank’s better than expected quarter as a sure indicator of future profits. He noted that the bank’s better-than-expected results might be a temporary blip for the bank. A massive expansion of unemployment benefits and other government stimulus have supported U.S. consumers and businesses so far, but they are expected to need more assistance.
“A good, well-designed stimulus package will simply increase the chance we get better outcomes, but there is so much uncertainty we’re not saying that that’s definitive,” Dimon said on a call with reporters on Oct. 12.
Dimon also noted that the total size of the bank’s reserves for loan losses rounded to $34 billion, roughly the same amount as the previous quarter.
In the earnings release, Dimon cited the need to maintain reserves for loan losses “given significant economic uncertainty and a broad range of potential outcomes” tied to the coronavirus pandemic.
The uncertainty of the economy will play a significant role in JP Morgan’s needs in the future. According to The Wall Street Journal, should the economy continue at its current recovery pace, JPMorgan may have $10 billion more than it needs to cover soured loans. However, should there be a deepening of the recession, Dimon suggested the bank could need another $20 billion in reserves.
JP Morgan has also seen an increase in deposits this quarter, indicating the American people’s nervousness around the current economy. Total deposits increased over $2 trillion for the first time, up from $1.525 trillion a year ago.
JP Morgan’s stocks are down this year by 27 percent. That number is marginally better than the KBW Nasdaq Bank Index, which is down 29 percent, but according to The Wall Street Journal, far worse than the broader market.