Dive Brief:
- JPMorgan Chase’s profit rose 24% for the quarter ending Sept. 30, with the bank reporting $11.69 billion in net income, buoyed by a $2.1 billion release in loan-loss reserves, the bank announced Wednesday.
- However, the bank’s revenue for the quarter was essentially flat, rising just 1% to $29.65 billion, compared to $29.26 billion from a year ago.
- The first of the major U.S. banks to report earnings this quarter, JPMorgan’s profit of $3.74 per share beat analyst expectations of $3 per share, according to The Wall Street Journal, which cited data from FactSet.
Dive Insight:
Starting in early 2020, the banking industry, JPMorgan Chase included, began growing its loan-loss reserves in anticipation of bad loans over the economic impacts of the COVID-19 pandemic.
After setting aside billions over more than a year, banks have been steadily releasing those funds. JPMorgan’s credit reserve release of $2.1 billion this quarter eclipses the $569 million it released in the prior year.
On Wednesday, however, JPMorgan Chase CEO Jamie Dimon made it clear the bank does not consider its scenario-driven releases core or recurring profits.
"These reserve calculations, while done extremely diligently and carefully, involve multiple, multiyear hypothetical probability-adjusted scenarios, which may or may not occur and which may continue to introduce quarterly volatility in our reserves," he said. "Our earnings, not including the net reserve release and an income tax benefit, were $9.6 billion."
Acquisition strategy
In the past year, JPMorgan has followed through on Dimon’s 2020 promise to be "much more aggressive with acquisitions across the board."
The bank made a series of fintech purchases, including OpenInvest and 55ip, and acquired restaurant review service The Infatuation, and a college financial planning platform, Frank.
"We are making important investments, including strategic, add-on acquisitions that will drive our firm’s future prospects and position it to grow and prosper for decades," Dimon said.
During a call with analysts, Dimon touched on the recent deals the firm made including its acquisition of British digital wealth management platform Nutmeg and its investment in Brazilian neobank C6, saying the moves fit with the bank’s long-term vision to grow its overseas retail presence over the next decade.
The acquisitions come as the bank launched its long-awaited digital retail bank in the U.K. last month, the culmination of a three-year effort to expand its retail presence in the market.
While JPMorgan looks abroad for growth opportunities, the New York City-based bank also continues to execute on its domestic expansion strategy.
"This quarter, we became the first bank to have branches in all of the lower 48 states, allowing us to serve more households, businesses and communities across the country," Dimon said. "We are more than halfway through our plan to open 400 branches in new markets by the end of 2022, with approximately 30% of these branches in low to-moderate income communities."
