JPMorgan Chase (JPM) tried to ease fears about rising interest rates as well as its own warning about "geopolitical uncertainties" as a rush of bank earnings Friday showed mixed results.
XThe rising rates that have shaken markets this week are nowhere near heights necessary to create problems for the bank, JPMorgan CEO Jamie Dimon said during a call with reporters to discuss the bank's third-quarter results, which beat estimates.
"The economy is still very strong, and that's across wages, job creation, capital expenditure, consumer credit," he said. "It's pretty broad-based, and it's not going to be diminished immediately."
Still, he cited an array of international tensions — Brexit, President Trump's tariff and trade skirmishes, turmoil in Italy, Turkey, Argentina and Saudi Arabia — as possible drags on the economy. When pressed on the matter during the media call, Dimon said that he was simply pointing out that the strife was intensifying.
"It just seems to be deteriorating a little bit," he said. "That's all."
In JPMorgan's earnings release, Dimon had said: "The U.S. and the global economy continue to show strength, despite increasing economic and geopolitical uncertainties, which at some point in the future may have negative effects on the economy."
But during the media call, Dimon said that the lines of communication between the business community and the Trump administration were still open and solid. He said the tariffs were a negotiating tactic that would hurt some individual companies but wouldn't have a dramatic effect on the economy. A trade deal with China was likely, eventually, he said, but it could take some time.
Then the company disclosed in a filing that it sees 2018 net interest income of $55.5 million and noninterest revenue growth of 7%-8%, with both stopping short of some estimates.
Shares of JPMorgan reversed lower, dipping 0.5% to 107.56 on the stock market today, after earlier rising as much as 2.5%. The stock is forming a saucer base with a 119.43 buy point. Meanwhile, Citigroup (C), which beat earnings forecasts, was up 1.1% at 69.12, forming a handle on a cup base with a 75.34 entry. Wells Fargo (WFC), which missed profit expectations rallied 1.2% to 52.05, working on a flat base with a 59.62 buy point.
'A Little Too Cute'
When asked how he felt about President Donald Trump's recent criticism of the Federal Reserve's rate hikes, Dimon said: "I've never seen a president who wanted interest rates to go up."
Trump, a day earlier, said the Federal Reserve was "getting a little too cute." He added: "It's ridiculous what they're doing."
Investors have unloaded stocks this week amid concerns over higher borrowing costs and global turmoil. The Federal Reserve's decision to dial short-term rates higher has the potential to push up interest rates on other loans. Rate hikes are one of the Fed's primary tools to keep the economy from overheating, as the rate hikes make borrowing more expensive and discourage businesses and people from borrowing too much.
As more investors and economists try to call the market top, Dimon said he saw nothing that indicated the U.S. was at a plateau. And management still saw resilience in the housing market, even as mortgages rates rise.
"Housing data is softer and things are more expensive," CFO Marianne Lake said. "But I would say the purchase market is still holding up quite well."
Later in the morning, during the call with analysts, Dimon said that people shouldn't be surprised by rising interest rates. And Lake said rates, while higher, aren't an obstacle.
"The level of rates is not surprisingly high," she said. "From our vantage point we're not seeing anything in terms of looking at our client dialogue or credit trends that would suggest this is problematic."
Dimon also said that people shouldn't be surprised by higher interest rates. "I'm surprised when people are surprised."
Bank Earnings: JPMorgan
Q3 earnings came in at $2.34 a share, above estimates for $2.24. Revenue of $27.82 billion beat expectations for $27.2 billion.
But fixed-income trading revenue fell 10%. Competition in that area has increased, the bank said, but it saw no evidence that it was shedding market share. Still, the weakness in fixed-income trading sent overall markets revenue 2% lower. Equity markets revenue rose 17% to $1.6 billion. Average core loans rose 6%.
Corporate and investment banking revenue rose 2% to $8.8 billion. Commercial banking revenue grew 6% to $2.27 billion. Asset and wealth management revenue climbed 3% to $3.56 billion. Consumer and community banking revenue jumped 10% to $13.29 billion.
Bank Earnings: Citigroup
Citigroup reported earnings per share of $1.73, beating estimates for $1.67. Revenue of $18.39 billion was just shy of views for $18.43 billion.
Consumer banking revenue rose 2% to $8.65 billion, though North America retail banking and branded card revenues fell. Institutional clients revenue dipped 2% to $9.24 billion, with fixed income revenue up 9% to $3.2 billion and equity revenue up 1% to $792 million. Investment banking revenue fell 8% to $1.2 billion.
Bank Earnings: Wells Fargo
Wells Fargo reported earnings per share of $1.13, missing estimates for $1.17. Revenue of $21.9 billion was roughly in line with expectations for $21.897 billion.
Net interest income edged up 1% to $12.6 billion. Community banking revenue rose 2.6% to $11.82 billion though mortgage banking was weak, while wholesale banking revenue slipped 2.7% to $7.3 billion. Wealth management revenue dipped less than 1% to $4.23 billion.
Average deposits were down 3% at $1.3 trillion, and average loans were down 1% at $939.5 billion.
"We saw positive business trends in the third quarter, including growth in primary consumer checking customers, increased debit and credit card usage, and higher year-over-year loan originations in auto, small business, home equity and personal loans and lines," CFO John Shrewsberry said in a statement.
The results for the banks came amid concerns over when the strong U.S. economy might break down and when loan portfolios might get a lift from the GOP's tax-cut legislation.
The 10-year Treasury yield had risen to seven-year highs before pulling back amid the sharp stock market sell-off. Short-term yields also have jumped to multiyear highs, but the spread between short- and long-term rates had widened slightly from post-crisis lows. Banks profit from a wider yield spread, as they borrow short and lend long.
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The post JPMorgan Calmed Wall Street About Its Biggest Fears — Then Said This appeared first on Investor's Business Daily.
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