JPMorgan Chase reported a dip in profits on higher costs Friday while still topping expectations as executives described US consumers as healthy and the economy as poised to avoid recession.
But while the bank sees the US economy as "resilient," CEO Jamie Dimon offered a bracing geopolitical outlook, calling conditions "treacherous and getting worse."
The US banking giant enjoyed increases in revenues for equity trading as well as higher fees for asset management and investment banking.
However, costs tied to credit losses more than doubled from the year-ago period to $3.1 billion due in part to $1 billion in reserves in case of bad loans.
But executives said the uptick in charge-offs was consistent with what it describes as "normalization" in credit quality rather than a sign of significant weakening in consumer health.
"We see the spending patterns as being sort of solid, consistent with the narrative that the consumers are on solid footing and consistent with a strong labor market," said Chief Financial Officer Jeremy Barnum, describing the dynamic as in line with a "soft landing" or "no landing" scenario.
A soft landing is one in which a period of fast growth gives way to slow growth rather than a recession.
JPMorgan's profits for the third quarter came in at $12.9 billion, down two percent from the same period a year ago.
Revenues were $42.7 billion, up seven percent.
Navigating Fed policy shift
Heading into the quarter, markets had been focused on how banks would navigate a pivot in US monetary policy to one in which interest rates are being brought down.
The shift is broadly expected to lead to lower net interest income (NII), which accounts for the difference banks make on loans minus what they pay in interest to depositors.
But JPMorgan's forecast was benign on this front, at least in the short run, as the bank lifted its estimate for 2024.
Barnum reiterated on a conference call that JPMorgan still sees NII trending lower in 2025, but emphasized that the benchmark can be choppy from quarter to quarter.
Barnum acknowledged that there had been a shift among US consumers away from some of the heavy spending on travel and entertainment of the last few years.
Some economists have expressed concerns about a possible US recession after a period of rising prices that has strained low-income households.
"You would normally think that rotation out of discretionary into non-discretionary would be a sign of consumers battening down the hatches and getting ready for a much worse environment," Barnum said. "But given the levels that it started from, what we see it as is actually like normalization."
'Prevailing uncertainty'
But while JPMorgan was more upbeat on the US economy than in recent quarters, Dimon raised worries about geopolitics.
"We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse," Dimon said in a press release.
"While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment."
Dimon, who speaks out frequently on public policy, again declined to endorse either of the two US presidential candidates.
But Dimon, who has sometimes been mentioned as a possible US Treasury secretary in a new administration, described the chances of such an appointment as "almost nil" in response to a question from an analyst.
"I probably am not going to do it, but I've always reserved the right," Dimon said. "I love what I do."
JPMorgan was joined in reporting results by Wells Fargo, which saw profits fall 11 percent to $5.1 billion, due in part to a drop in NII.
However, earnings per share topped analyst estimates, with the bank pointing to gains in venture capital investments and higher investment banking and asset management fees.
Shares of JPMorgan jumped 4.4 percent, while Wells Fargo surged 5.6 percent.