Q3’s performance remain unaffected despite JP Morgan (NYSE:JPM)’s legal provisions

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By Chris Hillman on October 17, 2014 Financial

On Tuesday, October 14, the third quarterly figures of JP Morgan (NYSE:JPM) came out to be lower than the expectation, which has disappointed investors. About 4% decline was seen in the bank’s shares, due to the reaction of the investors to the $1 billion reserves, saved to deal with the cost of the foreign exchange investigation it was facing. However, as the day progressed the company’s strong performance for the quarter became visible and things started to settle down leading to a flat closing of the shares.

The bank reported year-on-year growth in its portfolio regarding retail, commercial loans, client investment assets and credit card volumes, that have led JP Morgan (NYSE:JPM) into posting a firm operating performance across divisions for Q3. The circumstances this year seem favourable for the bank, and it may succeed in bringing its expenses down to $58 billion.

JP Morgan (NYSE: JPM) saw better trading revenues & higher underwriting costs:

JP Morgan (NYSE: JPM) has revealed revenue figure worth $8.8billion for its corporate and investment banking divisions. These divisions comprised of its advisory and underwriting trading along with treasury and security services operations. $4.75 billion of this revenue was gathered by the trading unit. The figure showed a slight improvement from the one in Q2 2012 and Q3 2013. The increase was the first since Q2 2013, that JP Morgan (NYSE:JPM)’s total trading revenues witnessed on year-to-year basis. Prior to this, in the last two quarters; revenues fell for more than 10%. Not only that but the bank’s M&A advisory and underwriting cost also saw improvement as compared to last year figures.

On the other hand, the compensation fees that JP Morgan (NYSE:JPM) had to put aside for corporate and investment banking division saw a 20% year-on-year boost in Q3 2014 to cross $2.8 billion figure. However, despite the compensation expense, the total number of revenue was around the average of 32%. Therefore it can be said that the compensation figure was not really a cause of concern for the company.

Retail Banking domain also contributed to JP Morgan (NYSE:JPM)’s overall performance:

Over the quarter JP Morgan (NYSE:JPM) saw improvement in its other operating divisions as well, mainly the bank’s consumer and business division which comprises of banking services provided to retail customers and small business holders. Credit cards, mortgages and deposits etc are a few examples of such services. These services saw a better performance record in Q2 and extracted pre-tax profits in excess of $1.5 billion in Q3 from revenues of $4.6 billion. Client’s revenues continued to increase and reached $208 billion. A 25% quarter-on-quarter increase was seen in the mortgage originating volumes, that reached $21.2 billion. The payment activity also increased over the quarter. The credit card charge value grew about $120 billion, while merchant processing volume exceeded $213 billion. The expenses of the company were within control, leading the overhead ratio to decrease to about 65%, which is the best record the company has generated since 2008.