What drove JP Morgan’s third-quarter profit? That loan you took out

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Study says Americans closing in on retirement now aren’t as healthy as prior generations were in their late 50s.
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A strong economy that led to better-than-expected loan demand helped J.P. Morgan Chase Co. beat expectations for third-quarter profit.

The bank’s profit rose 7.1% last quarter.

“JPMorgan Chase delivered solid results in a competitive environment this quarter,” Jamie Dimon, the bank’s CEO, said in a statement. “The global economy continues to do well and the U.S. consumer remains healthy,” he said.

Citigroup, another big U.S. bank, also topped Wall Street’s earnings and revenue projections. Citi posted earnings of $1.42 per share, which was 10 cents better than forecasts. Revenues rose 2.2% to $18.2 billion. It reported loan growth of 2%, with loans at the end of the period totaling $653 billion.

J.P. Morgan’s consumer and community banking business, Dimon said, got a boost from consumers willingness to take out loans and make purchases with credit cards. Demand in that business offset continued weakness in trading operations.

Credit card sales and merchant processing volumes were “up double digits.” And “loans and deposits continued to grow strongly,” he added.

The bank’s consumer business posted net income of $2.6 billion, an increase of 16%. Net revenue was $12 billion, up 6%. Average core loans rose 8% and average deposits totaled $646 billion, up 9%.

In the July-thru-September quarter, J.P. Morgan — which is now the nation’s largest bank when measured by customer deposits of $1.31 trillion, according to SP Global Market Intelligence — posted net income of $6.7 billion, up 7.1% from last year’s third quarter.

Earnings per share were $1.76, which was above analyst expectations for $1.65 and up from $1.58 a year earlier, according to analysts polled by earnings-tracker Thomson Reuters. 

The bank posted revenue of $26.2 billion, up 3% from last year’s third quarter.

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J.P. Morgan is among four major banks reporting third-quarter results today and tomorrow. Bank results mark the unofficial kickoff to the quarterly earnings season, which is closely watched by investors who use corporate results to gauge the health of the broader economy and U.S. consumer.

J.P. Morgan shares edged lower.

In midday trading, the stock slipped 71 cents to $96.13. Through Wednesday, the stock was up 12.2% in 2017, which is a smaller rise than the broad market’s 14.2% gain. 

The stock has been held back by low interest rates and lack of progress on President Trump’s plans to cut taxes and spend on infrastructure, two things that are viewed as good for the economy and boost bank profits. 

But bank stocks, including J.P. Morgan, have been in rally mode the past month as odds of tax changes becoming law have increased since the Trump administration rolled out its latest framework for tax cuts. J.P. Morgan shares are up nearly 8% in the past 30 days.

Investors, according to CME Group, are also now placing a nearly 90% probability on the Fed hiking rates another quarter point at its December meeting, adding to its two earlier hikes this year that have raised its key lending rate to a range of 1% to 1.25%.

At J.P. Morgan, business tied to trading was weak again in the third quarter, due to low market volatility and steadily rising stock prices that reduced clients’ trading activity. The 21% fall in trading revenue from last year’s third quarter was not unexpected, as Dimon said at a conference last month that he expected trading revenue to fall about 20% due to sleepy markets. The biggest trading falloff was in fixed income, or bond trading, where revenue fell 27%.

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President Donald Trump pitched his tax plan as a boost for truckers and the middle class at an event in Pennsylvania Wednesday, saying he wants ‘lower taxes, bigger paychecks and more jobs for American truckers and American workers.’ (Oct. 11)
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