An Early Reaction To JPMorgan's Q3 Earnings

Big banks kicked off third-quarter earnings season Tuesday with JPMorgan Chase & Co.'s JPM "typical" beat, according to BofA Securities.

The JPMorgan Analyst: Erika Najarian maintains a Neutral rating on JPMorgan with an unchanged $114 price target.

The JPMorgan Thesis: The bulk of JPMorgan's EPS beat can be attributed to a $611-million provision versus expectations of $2.8 billion, while fees contributed to the revenue beat, Najarian said in a note.

Core expenses — excluding any outsized legal expenses — were inline with expectations at $16.4 billion, the analyst said. 

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Despite the headline beat, it remains unclear if banks have fully recovered, she said.

On one hand, EPS tripled versus the bank's second-quarter results, but the bottom line results were "clearly" boosted by a $600-million reserve release, Najarian said.

Spread revenues of $13.2 billion missed estimates of $13.5 billion.

While consumer credit losses were down on a year-over-year and quarter-over-quarter basis, early stage and late-stage delinquencies were both "fairly stable" in the quarter, the analyst said.

Elsewhere, trading results exceeded expectations, while corporate and investment bank results came in better than JPMorgan's own estimate, she said. 

"We think the stock's performance may hinge on management's view on the pace of the recovery and the path to normalized ROE, and whether we've hit a bottom in spread revenues," Najarian said. 

JPM Price Action: Shares of JPMorgan were trading lower by 1.44% Tuesday afternoon at $100.96. 

Photo by M.O. Stevens via Wikimedia.