J.P. Morgan Chase & Co. (NYSE:JPM) knocked it out of the park with its third-quarter results on Wednesday, reporting a $3.6 billion profit on earnings of 82 cents per share, blowing away analyst estimates 52 cents per share.
J.P. Morgan's investment banking unit, which posted a profit of roughly $1.9 billion, up from $1.5 billion in the second quarter to offset not-so-dismal (but still pretty bad) consumer credit results. Stronger-than-expected results from asset management as well as commercial and retail banking were also big factors in the bank's better-than-expected numbers (
see the report below).
As first out of the gate, J.P. Morgan is setting the bar pretty high for the other big banks especially Bank of America Corp. (NYSE:BAC) and even Goldman Sachs Group Inc. (NYSE:GS), which both report third-quarter numbers this week or next. (See the preview for Goldman
here.)
Larger rival Bank of America may feel particular pressure to please Wall Street with its performance on the investment banking front since investors are already in a lather over the latest news to come out regarding the acquisition of Merrill Lynch & Co., where board members are quoted as saying the deal would
"screw the shareholders!!" Revenues from Merrill played a big part in lifting BofA's earning in the first and second quarters, and with legal troubles over the acquisition mounting by the day, management needs Merrill to prove its worth more than ever.
For its part Goldman doesn't have the commercial and retail banking assets that helped J.P. Morgan, but it also doesn't have exposure to consumer credit that put some drag on J.P. Morgan's results. Either way markets are expecting big things out of Goldman, which has reportedly been raking in money from investment banking services like fixed income, equity trading and underwriting.
And there's surely a lot of money to be made in that area as J.P. Morgan's fixed-income revenues hit a record high of $5 billion in the second quarter, compared with markdowns of $3.6 billion in the year-ago period. Goldman's results are expected to be so strong that the larger topic of discussion around its profits revolves around the likelihood that it will dole out its largest bonus pool ever, courting a backlash from the public and politicians. -
George White
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