JPMorgan smashes profit estimates on M&A boom, wealth management strength

[October 13, 2021]  By Anirban Sen and Elizabeth Dilts Marshall

(Reuters) -JPMorgan Chase & Co reported a bigger-than-expected 24% jump in third-quarter profit on Wednesday, boosted by a global dealmaking boom and strength in its wealth management arm.

The bank, whose fortunes reflect the health of the U.S. economy, said robust M&A activity offset a slowdown in trading. Its consumer bank also reported a strong quarter as credit card spending ticked up and customers paid off loans at a slower pace, meaning the bank earned more interest income.

JPMorgan also released $2.1 billion from its credit reserves during the quarter.

Banks were forced to set aside billions last year for possible loan defaults during the pandemic. But a consumer-friendly monetary policy and stimulus checks buoyed spending for the average American consumer and increased their savings, allowing banks to release some of their reserve capital.

JPMorgan's net income rose to $11.7 billion, or $3.74 per share, in the quarter ended Sept. 30, compared with $9.4 billion, or $2.92 per share, a year earlier.

Analysts on average had expected earnings of $3.00 per share, according to Refinitiv.

Wall Street banking has remained strong for most of the past year, as large, cash-flush financial sponsors and corporates embarked on a dealmaking spree, helping drive up investment banking fees at the largest Wall Street banks to record levels.

Total reported revenue rose 1% to $29.65 billion in the quarter.

Net revenues in the bank's asset and wealth management division were up 21%, boosted by higher management fees in the division that manages wealth for large institutions and individual investors.

Investment banking revenue surged 45% to $3 billion.

Other large U.S. banks including Bank of America, Citigroup, Wells Fargo and Morgan Stanley will report results on Thursday, while Goldman Sachs, Wall Street's premier investment bank, will round out the earnings season on Friday.

 A view of the exterior of the JPMorgan Chase & Co corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar

DEALMAKING FRENZY

With global investment banking fees hitting an all-time record in the first half of the year, banks like JPMorgan have made the most of the dealmaking boom.

The biggest U.S. corporations have benefited from booming stock markets that have driven up their valuations and allowed them to use stock as acquisition currency, while they have also sought to raise debt and used large investment banks for advice on deals.

During the quarter, JPMorgan maintained its position as the banking world's second-biggest provider of worldwide M&A advisory after Goldman Sachs, according to Refinitiv. The league tables rank financial services firms by the amount of M&A fees they generate.

High levels of fundraising, debt refinancings, convertible bond deals and stock sales also boosted investment banking.

JPMorgan's trading outfit, however, continued to see a slowdown in activity and did not hit the highs of the previous quarters that were boosted by unprecedented volatility in financial markets and a "meme stock"-fueled trading frenzy.

Overall, markets and securities services revenue fell 4% to $7.5 billion, with fixed income trading slumping 20% to $3.7 billion. However, equity markets revenue jumped 30%.

(Reporting by Anirban Sen in Bengaluru and Elizabeth Dilts in New York; Additional reporting by Noor Zainab Rizhvi; Editing by Saumyadeb Chakrabarty)

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