Banking giant JPMorgan Chase & Co. (NYSE: JPM) said Wednesday that its third quarter profit jumped sharply from last year, as higher investment banking revenue offset mounting loan losses.
The New York-based company reported third quarter net income of $3.6 billion, or 82 cents per share, up from $527 million, or 9 cents per share, in the year-ago period. On average, Wall Street analysts had expected a much lower profit of 52 cents per share.
Much higher underwriting revenue in its investment banking segment, whose net income rose to $1.9 billion from $882 million last year, helped the company offset sharply higher loan losses in the period. JPM reported a massive $7 billion in net charge-offs on consumer loans, more than double last year's level of $3.3 billion. Its card service division saw a big loss, as well, losing $700 million in the quarter.
The bank also added $2 billion to its cash reserves to protect against future losses. Its total loan loss reserves now sit at $31.5 billion.
JPMorgan CEO Jamie Diamond said in a statement that ''While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue.'' Chief Executive Jamie Dimon said in a statement.
JPMorgan shares rose $1.67, or +3.7% Wednesday.
The Bottom Line
We recently removed shares of JPM from our "recommended" list back on Oct.1, when the stock was trading at $43.82. The company has a .44% dividend yield, based on last night's closing stock price of $45.66. The stock has technical support in the $40-$41 price area. If the shares can continue to run higher, we see overhead resistance around the $50 price level. We would remain on the sidelines for now.
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