By Antoine Gara , FORBES STAFF
Shares in JPMorgan Chase JPM -0.3%, America's biggest bank by assets, have surged 40% over the past 12-months as investors bid up bank stocks on the expectation that a growing economy and the Federal Reserve's hiking of interest rates will lead to surging profits. So far, this calculus has proven correct even as dealmaking and trading on Wall Street puts a damper on big bank earnings.
On Wednesday morning, JPMorgan reported a 7% rise in third quarter profits and a 3% increase in overall firm-wide revenues, fueled by the impact of rising rates on its bottom line. The bank earned $6.7 billion in profits and revenues $26.2 billion ($25.3 billion on a managed basis), generally surpassing analyst forecasts. On a per share basis, JPMorgan's third quarter profits came in at $1.76, an 11% year-over-year rise driven by $4.5 billion in net share repurchases during the quarter. Wall Street had expected JPMorgan to earn profits of $1.65 a share and revenues of $25.6 billion.
The results were led by a 10% rise in firm-wide net interest income of $13.1 billion on account of rising rates, as the Federal Reserve embarks on its first post-financial-crisis hiking cycle. These 0.25% quarterly hikes are leading to hundreds of millions of dollars in extra profits for America's large banks, propelling optimism of a new bull market for financials. This despite stagnant results across traditional moneymakers for big banks such as trading and investment banking divisions, which are being hamstrung by low market volatility and falling deal volumes. JPMorgan's investment bank recorded a 9% drop in third quarter revenues to $8.6 billion and a 13% drop in profits to $2.5 billion.
"JPMorgan Chase delivered solid results in a competitive environment this quarter with steady core growth across the platform. And for the first time, the Firm led the nation in total U.S. deposits, as consumers and businesses continue to view us as their partner of choice,” said CEO Jamie Dimon. "The global economy continues to do well and the U.S. consumer remains healthy with solid wage growth."