JP Morgan Results: Where’s the Revenue Growth?

J.P. Morgan Chase reported third-quarter results Tuesday that largely confirmed concerns about the ability of banks to grow in the current environment.

“We had decent results this quarter”, JP Morgan CEO Jamie Dimon said in a statement.

Banks have been under pressure to cut costs and hold more capital in reserve in case of future financial shocks.

“It’s reassuring to see J.P. Morgan make progress” in getting smaller and simpler, said Steven Chubak, an analyst with Nomura Holdings Inc. Excluding $US2.2bn of tax benefits and other one-time items, earnings were $US1.32 a share.

Figures posted overnight after USA markets closed showed a 22% rise in underlying profits to 6.8 billion U.S. dollars (£4.5 billion), but the figure missed market forecasts as revenue declined across its commercial and consumer banking business. Analysts had expected $US23.69bn.

JP Morgan is the first of the United States banks to report, followed by Bank of America later on Wednesday and Goldman Sachs and Citigroup on Thursday.

On J.P. Morgan, it is “tough to jump up and down about the results”, given the weakness in revenue, especially in trading businesses, noted Evercore ISI analyst Glenn Schorr.

Analysts polled by Thomson Reuters had expected earnings of $US1.37 a share. This included lower revenue from its mortgage banking unit. And that the balance of those loans was up 13%.

But it said that net revenue was $23.5bn, down from $25bn compared with the year before.

Ms. Lake also noted on the call that the bank has been ramping up efforts to shed deposits from certain institutional customers that have become less profitable and that regulators view as subject to fleeing the bank in a crisis.

Return on equity, a measure of the JP Morgan’s profitability, was 12 per cent in the third quarter compared with 10 per cent a year earlier.

Revenue declined compared to a year ago.

This was partially offset by $1 billion in legal expense, which brought down earnings by $0.26 per share.