J.P. Morgan's Profits Up on Lending Boost -- 2nd Update

By Emily Glazer Features Dow Jones Newswires

J.P. Morgan Chase & Co. said its third-quarter profit rose 7.1% as a boost from lending offset weaker trading results at the nation's biggest bank by assets.

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The bank reported net income of $6.73 billion, or $1.76 a share. That compares with a profit of $6.29 billion, or $1.58 a share, in the same period of 2016. Analysts polled by Thomson Reuters had expected earnings of $1.65 a share.

Revenue rose 2.7% to $26.2 billion. Analysts had expected $25.23 billion.

Shares slipped 0.4% premarket after the results were announced.

Investors will next turn to the bank's earnings call Thursday morning to find out whether Chief Executive James Dimon or Chief Financial Officer Marianne Lake will shed light on topics ranging from the bank's trading revenue, which could foreshadow results across Wall Street, and further views on long-awaited regulatory changes from the Trump administration.

The boost from still low -- but rising -- interest rates will also likely be a major focus, as an increase in rates can help the profitability of big consumer lenders like J.P. Morgan. Sharp moves in the yield of the 10-year Treasury in the third quarter had whipsawed bank shares.

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Rates have risen this year as the Federal Reserve has increased its short-term target. But the 10-year hasn't risen as much, leading to a flattening of the yield curve, which can hamper bank profits.

J.P. Morgan's trading revenue decreased 21% to $4.53 billion from $5.75 billion in the third quarter of 2016, hurt by a 27% falloff in fixed-income trading revenue alongside a 3.6% decline in equities.

J.P. Morgan extended $26.9 billion in mortgages in the quarter, down 1% from the $27.1 billion the bank extended in the third quarter a year ago. Revenue in its mortgage division, one of the largest in the U.S. by volume, was $1.56 billion, down 17% from the $1.87 billion it reported in the year-earlier period.

Overall profit at the corporate and investment bank was $2.55 billion, a 13% decrease from $2.91 billion in the same period last year. In the consumer bank, profits were $2.55 billion compared with $2.2 billion in the third quarter a year ago. J.P. Morgan's commercial bank earned $881 million, a 13% increase from the $778 million it earned in the year-ago quarter, and the bank's asset-management unit reported profits of $674 million compared with $557 million in the third quarter of 2016.

J.P. Morgan set aside $1.46 billion in the third quarter to cover loans that could potentially turn bad in the future. That compares with $1.13 billion in the third quarter of 2016 and $1.18 billion in the second quarter of 2017. The bank lost $1.27 billion to loan defaults, or 0.58% of its overall portfolio, compared with a 0.56% charge-off rate in the second quarter of 2017.

Costs decreased to $14.32 billion from $14.46 billion a year earlier. Executives said in a February investor presentation that expenses are expected to rise in 2017 to fund investments and growth.

Return on equity, a measure of profitability, was 11% in the third quarter compared with 10% a year ago.

Since the election, J.P. Morgan's shares are up 38%, alongside a 34% jump in the KBW Nasdaq index of bank stocks.

Though bank stocks have been fairly flat in the months following the postelection surge, they came roaring back toward the end of the third quarter, in part due to investor optimism around a tax-code overhaul.

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

October 12, 2017 08:08 ET (12:08 GMT)