By Manya Saini and Nupur Anand
Oct 13 (Reuters) – JPMorgan Chase fell short of quarterly profit estimates for the first time in nearly three years as market volatility and an uncertain economic outlook dampened dealmaking and reduced bond market trading activity in recent months.
Wall Street’s dealmakers had a cracking start to the year, highlighted by the historic listing of Elon Musk’s SpaceX. But the IPO market has lost steam in recent weeks, threatening what could have been a banner year for the investment banking business.
JPMorgan reported an 8% decline in third-quarter investment banking fees versus the second quarter even as it recorded a 14% rise compared with a year earlier.
Revenue at its markets division climbed 15% in the third quarter from the prior year. Equity markets surged 49%, as investors rejigged their portfolios thanks to uncertainty over global interest rates and surging energy prices. Fixed-income trading revenue declined 4%.
“There is a slight miss on Street consensus for fixed income trading, equity underwriting and also debt underwriting,” Chris Marinac, director of research at Janney Montgomery Scott, said.
Investment banking and trading grew at the lower end of the bank’s own estimates too. In September, JPMorgan Co-President Doug Petno had said investment banking fees and markets revenue were expected to be up in the “mid-to-high teens” percentage in the third quarter.
The bank reported a profit of $5.57 per share, for the three months ended September 30. Analysts on average had expected $5.85 per share, according to estimates compiled by LSEG. It was the banking giant’s first profit miss since the fourth quarter of 2023, according to LSEG data.
The stock reversed early losses in premarket trading and was last up 0.8%, after falling nearly 3% shortly after the results were released.
IPO MARKET LOSES STEAM
Analysts have said the IPO market has been selective, not shut, and delayed offerings could still launch if conditions stabilize during the fourth quarter.
Banks earn lucrative fees from underwriting the initial offering, as well as from subsequent follow-on sales as companies issue more shares.
“Investment banking fees each rose at a mid-teens rate, helped by strong levels of client activity, although activity did moderate somewhat during the quarter,” CEO Jamie Dimon said in a statement.
CONSUMER BANKING BOOST
The US economy has so far defied expectations as the labor market has held up and consumer spending remains healthy, keeping the industry’s crucial lending business churning.
Net interest income, excluding markets – the difference between what a bank earns off loans and pays out on deposits – increased 6% in the quarter to $24.7 billion. Average loans rose 10% year-over-year.
“The US economy continued to be fueled by strong business investment and ongoing consumer spending,” Dimon said.
JPMorgan said it expects interest income for the year to come in at roughly $106.2 billion, market dependent, and $97.2 billion, excluding markets.
Loan growth has come into sharper focus after the Federal Reserve hiked interest rates for the first time since 2023 in September, with hawkish signals of more possible tightening ahead.
That, combined with a spike in bond yields, has the potential to push borrowers out of the credit market as they navigate higher borrowing costs and tighter financial conditions.
For 2027, the bank forecast net interest income, excluding markets, of about $107 billion on a preliminary basis.
(Reporting by Manya Saini in Bengaluru and Nupur Anand in New York; Editing by Saumyadeb Chakrabarty)
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