Continuing the strong momentum in 3Q23
- JPM 3Q23 earnings topped estimates on stronger than expected net interest income (NII)
- NII guidance raised for fourth time this year as JPM continues to benefit from higher rates
- Management believes US consumers and business generally remain healthy but economic risks remain
3Q23 results continues to beat on both revenue and net profit. Total managed revenues of US$40.7bn improved +21% y-o-y/-4% q-o-q, ahead of consensus estimates of US$39.6bn, driven by a +30% y-o-y/+5% q-o-q improvement in net interest income to US$22.9bn, largely driven by higher rates and higher revolving card balances, partially offset by deposit balances, alongside lower than expected provisions. During the quarter, non-interest income of US$17.8bn (+12% y-o-y/-13% q-o-q) declined q-o-q due to lower trading and advisory revenue. Net profit declined 12% y-o-y/ 24% q-o-q. Earnings per share of US$4.33 surpassed consensus estimates of US$3.96. Credit costs of US$1.4bn (2Q23: US$2.9bn) included a US$113m net reserve release and US$1.5bn of net charge-offs. CET1 ratio continues to be strong at 14.3% with ROE at 22% as JPM declared a quarterly dividend of US$1.05/share (previous: US$1.00/share) during the quarter. Loan book grew +17% y-o-y/+5% q-o-q to US$1.3T while deposits declined 4% y-o-y/1% q-o-q to US$2.4T.
Management raised guidance for NII for fourth time this year; US consumers and businesses generally remain healthy. Management raised guidance for NII the fourth time this year to US$89bn (previous guidance in July: US$87bn) as outlook continues to be favourable with rising rates for JPM, while highlighting that current NII levels could moderate to US$80bn on a more sustainable basis. In the meantime, management believes US consumers and businesses generally remain healthy while economic risks remain. We maintain BUY with a TP of US$165 (c.11x FY24F P/E) as JPM continues to deliver superior ROE compared to peers, outperforming smaller peers who are seeing decline in NII due to deposits and funding costs challenges.