Banking stock to watch: JPMorgan Chase & Co. (NYSE: JPM)

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JPMorgan Chase & Co. (NYSE: JPM) in the third quarter of FY 17 has posted better than expected results but the bank experienced big drop in trading revenue that has hit the share price in pre-market trading. As a result, the stock lost over 0.4% this morning (as of 10:07AM EDT on October 12th, 2017; Source: Google finance). Overall the trading revenue slumped by 16% in the three months through to the end of September, with most Wall Street banks suffering from a lack of volatility in the markets. The fixed income trading revenues were down by almost a third, due to the sustained low volatility and tighter credit spreads. The equities trading revenue declined 4% compared to 2016’s relatively strong quarter, and showed lower revenue in derivatives predominantly offset by strength in Prime Services and Cash Equities. Further, its consumer and community banking division increased revenues by 6% to US$12bn, while its corporate and investment banking arm experienced revenues rise 5% to US$3.1bn.

Meanwhile, stock and bond trading revenue has fallen this year at major banks because markets have been relatively quiet. JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs all saw trading revenue drop in the second quarter this year, and analysts have been projecting another decline this quarter

JPM in the third quarter of FY 17 has reported the adjusted earnings per share of $1.76, beating the analysts’ estimates for the adjusted earnings per share of $1.65. The company had reported the adjusted revenue grew to $26.2 billion in the third quarter of FY 17, beating the analysts’ estimates for revenue of $25.2 billion.

Moreover, the firm’s return on common equity, a measure of how well a bank is performing, was 11 percent in the third quarter, up from 10 percent a year earlier. Major banks like JPMorgan try to keep that metric above 10 percent. Further, the bank saw higher deposit and loan growth and higher revenue in its credit card division, which the bank has been expanding aggressively in the last year with a new high-end credit card known as Chase Sapphire Reserve. Charge-offs in that business have been creeping steadily higher for several quarters, however, and the bank had to set aside an additional $223 million to cover potential losses.

On the other hand, the natural disasters in the US and abroad have impacted many of JPM’s customers and the bank have responded with enormous financial support as well as the expertise and generosity of the bank’s employees to help these customers, clients and communities.

JPMorgan Chase stock has risen 41.33% in a year (source: Google Finance).

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