JPMorgan sets aside more money for potential bad loans but says consumers are on 'solid footing'

NEW YORK (AP) — JPMorgan's net income fell 2% in the third quarter as the bank had to set aside more money to cover bad loans, but the results topped Wall Street estimates and shares rose in morning trading.

Net income fell to $12.9 billion from $13.2 billion in the year-ago quarter, the New York bank said Friday. However, earnings per share rose to $4.37 from $4.33 because there were fewer outstanding shares in the latest quarter. The result beat Wall Street analysts’ forecasts, which called for a profit of $3.99 a share, according to FactSet. Total revenues rose to $43.3 billion from $40.7 billion a year ago.

JPMorgan set aside $3.1 billion to cover credit losses, up from $1.4 billion in the same period a year ago. Consumers' credit card debt has been on the rise due to the lingering impact of the bout of inflation that hit the U.S. economy starting in 2021 and delinquencies have been rising. But JPMorgan Chief Financial Officer said on a call with analysts that the consumer is “on solid footing."

Net interest income, the difference between the interest the bank takes in on its loan portfolio and the interest in pays out on customer deposits, rose 3% to $23.5 billion. That came in above estimates of $22.9 billion, according to FactSet. JPMorgan raised its forecast for net interest income for the full year, but cautioned the measure should start to decline as the Federal Reserve continues to cut interest rates.

JPMorgan shares rose 4.6% in morning trading.

The country’s biggest banks have benefitted from higher interest rates for the last two years. The Fed’s mid-September interest rate cut happened too late in the quarter to significantly influence results, but investors are watching closely to see how that rate cut — and expected future ones — will affect banks’ results going forward.

At their last meeting Sept. 18, Fed officials reduced their rate to 4.8%, from a two-decade high of 5.3%, and penciled in two more quarter-point rate cuts in November and December.

CEO Jamie Dimon said the bank continues to monitor geopolitical tensions that he called “treacherous and getting worse.” While Dimon did not cite specific any specific conflicts, he has previously voiced concerns about the war in Ukraine and the growing tensions in the Middle East.

“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” Dimon said in a statement.

Dimon often weighs in on global and economic issues that go beyond the scope of banking. He’s often seen as the banker that Washington and global leaders can turn to for advice, solicited or unsolicited. His comments tend to reverberate through Washington and Corporate America.

In fact, Dimon's name has in the past been floated as a possible Treasury Secretary or other Cabinet position. When asked on the call if he would serve if asked by the next administration, he responded, “I think the chance of that is almost nil and I probably am not going to do it but, you know, I always reserve the right.”

Another of the nation’s biggest banks, Wells Fargo, reported third-quarter profit of $1.42 per share, beating the $1.28 per share that analysts were calling for.

The San Francisco bank, which at one time was the country’s biggest home mortgage lender, has evolved in recent years, generating more income through fees. As such, while its net interest income fell 11% from the same period a year ago, that was offset by higher fee income.

Wells shares rose 5.8% in morning trading.

Wells’ posted revenue of $20.4 billion in the period, down from $20.9 billion a year ago.

The Biden Administration earlier this year lifted a consent order on the bank that had been in place since 2016 following a series of scandals, including the opening of fake customer accounts.

Last month, Wells agreed to work with U.S. bank regulators to shore up its financial crimes risk management controls related to suspicious activity and money laundering. The Office of the Comptroller of the Currency said it had identified “deficiencies relating to the bank’s financial crimes risk management practices and anti-money laundering internal controls in several areas.”

On Thursday, the U.S. Justice Department announced that TD Bank would pay approximately $3 billion in a historic settlement with U.S. authorities for the financial institution’s lax practices that allowed significant money laundering over multiple years.

TD Bank pleaded guilty to conspiracy to commit money laundering, the largest bank in U.S. history to do so.

Bank of America reports its latest financial results on Tuesday.

Its shares followed other banks' higher Friday, gaining around 5% in morning trading.

Late Thursday, Warren Buffett's Berkshire Hathaway disclosed in a regulatory filing that it had sold another 9.5 million of Bank of America shares, bringing its total stake below 10%. The sale netted Buffett's investment firm around $380 million.

Berkshire Hathaway has steadily sold off around 125 million Bank of America shares since July.