Earnings Season: JP Morgan and Blackrock blow past estimates

US banks and asset managers have kicked off the Q3 earnings season and it’s been another impressive quarter for both JPMorgan Chase & Co (All Sessions) and BlackRock Commodities Income Investment Trust PLC, which have exceeded market expectations once again. There will be an increased focus on this round of earnings as investors will want to know how rising prices have affected corporate margins and what to expect in terms of growth for the fourth quarter given rising concerns about stagflation.

JP Morgan

Net revenues for the third quarter were $29.6 billion, 5% lower than the previous quarter but net income rose to $11.7 billion, or $3.74 per share, compared with $9.4 billion, or $2.92 per share, a year earlier, and beating estimates of $3 per share. Quarterly net interest income was $13.2 billion, up 1%, whilst non-interest revenue was up 3%, driven mostly by higher investment banking fees. Equity income benefitted from upbeat sentiment in stocks throughout the quarter, but trading revenues have taken a hit after volatility has died down from the peaks of the pandemic. Stimulus checks boosted consumer credit spending and interest income despite ongoing concerns about the effects of the pandemic.

Once again, the bank benefited from releasing provision for credit losses as borrowers continued to hold up better than previously expected, with a quarterly net reserve release of $2.1 billion. The results also include a $566 million income tax benefit related to finalising the firm’s 2020 US federal tax return, which equals a $0.19 increase in EPS.

JP Morgan shares are sitting just above $165 prior to market open having dropped from an all-time high last week as overall market sentiment worsened. The shares are still up 66% from the same time last year, having pulled back to $139 per share during the third quarter, but the short-term outlook looks rather subdued.

Blackrock

Net revenue in the third quarter was $5,050 million a 16% increase on revenue year on year, beating estimates of $4,807 million. Net income comes in at $1,681 million with $98 billion of long-term net inflows driven by continued momentum in ETFs and active strategies. The asset manager’s earnings were boosted by an improving economy, increasing assets under management to 9.46 trillion dollars, a 21% increase from a year earlier. Adjusted net income rose to $10.89 per share, up from $9.22 per share a year earlier, and above estimate of $9.35 per share.

Blackrock shares are currently up 15 dollars or 2% at the pre-market, trading around $853 after earnings beat expectations but this is still 11% down from their peak in August as fears of stagflation dampen market sentiment amid rising energy prices. Blackrock’s growth is mostly organic and so future guidance continues to be positive, but the fourth quarter looks set to be steeper for share prices to rise and so we may struggle to see a new all-time high before year-end.