Citigroup Q3 results beat expectations on less credit losses: JP Morgan

JP Morgan Building

NEW YORK, Oct. 14 : US top-ranking banks J.P. Morgan Chase & Co. and Citigroup Inc. on Tuesday reported expectation-beating operating results for the third quarter of 2020 largely thanks to improvement in market credit conditions.

J.P. Morgan posted 9.44 billion U.S. dollars of net income in Q3, which surged 101 percent from Q2 and rose 4 percent from the same period of 2019. The net income of J.P. Morgan in Q3 translates into 2.92 U.S. dollars per share, exceeding market expectation of 2.23 U.S. dollars per share. In particular, the consumer and community banking sector had 3.87 billion U.S. dollars of profits in comparison with 176 million U.S. dollars of losses in Q2.

J.P. Morgan registered 29.94 billion U.S. dollars of net revenues in Q3, slightly lower than that in Q2 and the same period of 2019, but higher than analysts’ estimate of 28.4 billion U.S. dollars.

Meanwhile, Citigroup had 3.2 billion U.S. dollars of net income, or 1.4 U.S. dollars per diluted share, materially higher than 0.5 U.S. dollar per share in Q2 and market expectation of 0.93 U.S. dollar per share. However, Citigroup’s net income in Q3 dropped 34.69 percent year on year.

The drop of net income was largely driven by the lower revenues, an increase in expenses and higher credit costs, said Citigroup in a release.

Citigroup generated 17.3 billion U.S. dollars of total revenues in Q3, down 12 percent quarter on quarter and 7 percent year on year, respectively. By contrast, analysts forecasted the bank had 17.2 billion U.S. dollars of total revenues in Q3.

Both banks recorded less credit losses in Q3 as the economy continued to reopen and stimulus measures were at play.

J.P. Morgan had 611 million U.S. dollars of provisions for credit losses in Q3, down from 10.47 billion U.S. dollars in Q2 and 1.51 billion U.S. dollars in Q3 of 2019.

Citigroup reported 2.26 billion U.S. dollars of net credit losses, net allowance for credit losses and other provisions in Q3, in comparison with 7.9 billion U.S. dollars in Q2, 2020 and 2.08 billion U.S. dollars in Q3, 2019.

J.P. Morgan had 2.6 trillion U.S. dollars of assets under management, up 16 percent year on year, and the asset management sector contributed 877 million U.S. dollars of net income, up over 30 percent both from the previous quarter and Q3, 2019.

J.P. Morgan would operate branches in all of the lower 48 U.S. states by obtaining approval to open branches in ten more states recently, said Jamie Dimon, chairman and CEO of J.P. Morgan.

Dimon also noted that a well-designed stimulus package would lift the likelihood for the bank to have better operating results.

U.S. corporate profits have been more resilient than expected as member companies under the S&P 500 Index are less exposed to the service sector than the overall economy, according to a research note by UBS Global Wealth Management issued on Monday.

UBS raised the estimate of accumulated earnings per share with S&P 500 member companies in 2020 to 130 U.S. dollars from 125 U.S. dollars in addition to a similar hike for estimated earnings per share in 2021.

Member companies under the S&P 500 would have 34.5 U.S. dollars of accumulated earnings per share in Q3, 5 percent higher than market expectation of 32.9 U.S. dollars, Savita Subramanian, equity and quant strategist with Bank of America Securities, said on Monday.

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