Before Friday's trading, the largest bank in the United States, JPMorgan Chase, released its third quarter financial report. In the current era of high interest rates, JPMorgan Chase is still making a lot of money, with its third quarter profits and revenue exceeding market expectations. Before the US stock market, JPMorgan Chase's stock price rose by more than 1%.
According to the financial report, JPMorgan Chase's revenue for the third quarter of 2023 was $39.874 billion, a year-on-year increase of 22%; The net profit was $13.151 billion, a year-on-year increase of 35%, equivalent to earnings per share of $4.33.
Benefiting from higher interest rates and the acquisition of First Republic Bank, JPMorgan Chase's main source of revenue for the three months ended September 30 was net interest income of $22.9 billion, a 30% year-on-year increase, higher than analysts' expectations. The bank stated that it currently expects this revenue source to reach $88.5 billion this year.
Although the surge in interest rates this year caught some smaller peers off guard and triggered a regional banking crisis in the United States in March, JPMorgan Chase has so far performed well in the turmoil.
JPMorgan Chase CEO Jamie Dimon acknowledges that these results benefit from a surplus in net interest income and below normal credit costs, both of which will tend to normalize over time.
In addition, despite signs of recovery in the M&A and initial public offering (IPO) markets, lingering economic uncertainty is still dragging down trading activity. In September, several high-profile companies made their debut on the US stock market, including ARM, a chip design company under Softbank Group, and Instacart, a grocery delivery company, with JPMorgan Chase being the main underwriter for both companies.
But these newly listed companies all experienced breakdowns after their first day of sharp gains, shattering hopes of a substantial recovery in the IPO market. According to the financial report, JPMorgan Chase's investment banking business revenue in the third quarter was $1.61 billion, a year-on-year decrease of 6%.
Previously, in response to an unexpectedly strong economy and to combat inflation, the Federal Reserve announced that it would maintain interest rates at a higher level for a longer period of time. Since then, bank stocks have fallen sharply in August and September. As a key indicator of long-term interest rates, 10-year US Treasury yields have surged to their highest level in 16 years.
High interest rates have hit banks in several ways. As customers turn to higher yielding investment vehicles such as money market funds, the industry is forced to pay more deposit interest. The increase in yield means that the value of bonds held by banks decreases, resulting in unrealized losses and putting pressure on capital levels, which is also one of the main reasons for the collapse of Silicon Valley banks. In addition, higher borrowing costs have suppressed the demand for mortgage loans and corporate loans. Therefore, banks, including JPMorgan Chase, are also providing more funds for expected loan losses.
Various warnings
Damon said that although both American consumers and businesses are healthy, household cash balances are decreasing, and consumption will also decline. The tight labor market and "extremely high levels of government debt" mean that interest rates may further climb. He warned that the future may not be as optimistic as it is now.
Damon has recently repeatedly stated that he has been warning clients that interest rates may not only remain high, but may also rise significantly on this basis.
He claims that we are still unaware of the long-term consequences of quantitative tightening policies, as they will reduce liquidity in the system as market makers' capabilities are increasingly restricted by regulations.
At the same time, Damon also warned that conflicts between Russia and Ukraine, as well as in the Middle East, may have profound impacts on energy and food markets, global trade, and geopolitical relations, making this the most dangerous moment in the world in decades. He added that although we hold the best hope, we are also prepared for a broad outcome.