(Reuters) – JPMorgan Chase & Co JPM.N executives are cautiously optimistic that the coronavirus pandemic will not send the economy into the worst possible tailspin, and feel confident enough in the bank’s financial position to start repurchasing shares again soon if regulators allow.
Their comments came on Tuesday after JPMorgan reported much stronger-than-expected results for the third quarter, beating profit estimates and setting aside relatively little money for loan losses.
Only one of its four major units – consumer banking – saw revenue and profits decline, and even those customers are holding up relatively well, Chief Financial Officer Jennifer Piepszak said. Other businesses, including trading, investment banking, commercial lending and wealth management, posted gains.
Although JPMorgan expects loan losses to escalate, and added another $611 million to its loan loss reserves, that figure is tiny compared to the previous quarter and smaller than what many analysts had expected.
JPMorgan has the financial wherewithal to handle those losses and start buying back shares again if regulators will allow it, Chief Executive Jamie Dimon said. The Federal Reserve has ordered big banks to halt buyback programs and limit dividends through year-end.
“We’ll be patient, but we have tremendous amount of wherewithal to do both when the time comes,” he said. “And I hope we’re allowed to do it before the stock is much higher.”
JPMorgan shares fell 1.8% to $100.57 in morning trading. The stock is down 27.4% year-to-date.
As the largest U.S. bank and one of the biggest global lenders, JPMorgan’s results are viewed as a barometer of the economy and financial markets.
Its profit rose 4% to $9.4 billion, or $2.92 per share, in the third quarter, compared with $9.1 billion, or $2.68 per share, in the year-ago period.
Analysts had expected its profit to fall, with a consensus estimate of $2.23 per share, according to Refinitiv.
JPMorgan’s revenue fell slightly to $29.9 billion, but still came in ahead of expectations.
Trading was a bright spot for the third consecutive quarter, as market volatility caused volumes to swell. Revenue there jumped 30% to $6.6 billion.
Analysts cheered the results. Evercore ISI’s Glenn Schorr called JPMorgan “the Rickey Henderson of banks,” a reference to a celebrated Major League Baseball star.
“JPMorgan put up as strong of a quarter as we could have hoped for,” he wrote in a note to clients.
Executives were careful not to offer too sunny an outlook, especially because Congress has failed to pass another stimulus bill. Lockdowns intended to prevent the virus from spreading have put millions out of work and shuttered thousands of businesses, causing the worst recession in decades.
JPMorgan looks at a range of possible economic outcomes when setting aside reserves, executives said. While its “base” case has improved from the second quarter, it could very well deteriorate again.
“There’s so much uncertainty,” said Dimon. “If better outcomes happen, we are over-reserved by $10 billion. If the double-dip happens, we would be under-reserved by $20 billion.”
So far this year, JPMorgan has added $19.4 billion to its credit loss provisions, more than four times the comparable figure for 2019.
Low interest rates hurt JPMorgan’s results in a predictable way, as the U.S. Federal Reserve is keeping rates at nearly zero to offset the impact of the pandemic.
JPMorgan’s net interest income fell 9% to $13.1 billion in the third quarter and its net interest margin dropped to 1.82%. Those metrics are closely watched by investors to show how much central-bank rate policies are affecting income, and how well banks are managing their balance sheets.
JPMorgan maintained its forecast for full-year interest income at about $55 billion, but said adjusted annual expenses will be about $66 billion, worse than its prior forecast of $65 billion.
JPMorgan’s results came in contrast to Citigroup Inc C.N, which also reported earnings on Tuesday. Citigroup beat analyst estimates but executives offered a less optimistic economic outlook, especially for its consumer business.
Reporting by Noor Zainab Hussain in Bengaluru and David Henry in New York; Writing by Anirban Sen and Lauren Tara LaCapra; Editing by Saumyadeb Chakrabarty and Nick Zieminski