JPMorgan Misses Q3 Profit and Revenue Estimates, Goldman Beats, and Dimon Warns on 6% Rates

Ahead of third-quarter earnings season, with S&P 500 profits forecast up close to 30% from a year earlier, the first four big banks reported on Tuesday, Oct. 13. The results were mixed. JPMorgan Chase missed on both profit and revenue, Goldman Sachs beat on revenue, and Citigroup raised its guidance.

U.S. regular trading had not opened yet at the time of these reports, so every share move below is a pre-market indication, not an opening price.

JPMorgan's rare double miss

JPMorgan reported earnings of $5.57 per share against a consensus of about $5.90 from analysts surveyed by LSEG. Reported revenue came in at $50.17 billion against an estimate near $51.23 billion. On a managed basis, revenue was $50.91 billion versus $51.22 billion expected.

A $658 million net securities loss dragged on the quarter. It does not explain the whole shortfall. Excluding that loss, EPS would have been $5.75, still short of the $5.90 consensus.

Investment banking also slowed. A regulatory filing put investment banking fees at $3.005 billion, fixed income markets revenue at $5.366 billion and equity markets revenue at $4.954 billion.

Dimon's written statement called it "another quarter of strong results." He conceded that trading and investment banking activity "did moderate somewhat during the quarter." He also said the bank "reduced share repurchases this quarter," in line with what he called the bank's capital hierarchy.

Pre-market reaction was inconsistent. JPMorgan shares were down roughly 3% to 3.5% in early indications. By a later pre-market check they had recovered to about 1% higher.

Wells Fargo, Goldman and Citi

Wells Fargo's revenue and net interest income also fell short of estimates. Growth extended across its consumer banking and commercial segments. Its shares were down between 0.5% and 1.2% pre-market, depending on the timing of the check.

Goldman Sachs went the other way. It beat revenue estimates, led by strong equities trading. Its $18.68 billion in net revenue was nearly $2 billion more than the LSEG estimate, and equities revenue jumped 72% from a year earlier to $6.44 billion.

Citigroup reported fixed income markets revenue of $4.4 billion, up 4% from a year ago. Analysts had expected $4.31 billion, according to StreetAccount. Citi said the growth came mainly from spread products and other fixed income.

Citi also raised its full-year net interest income guidance, excluding markets, to growth in the mid-to-high 6% range. It had previously guided to 5% to 6%. The bank credited continued fee momentum in services, banking and wealth.

Dimon on rates

The sharper news came from Dimon's Q&A with reporters. The 10-year Treasury yield reached about 5.3% by the end of September, up from about 4% six months earlier. Dimon said the next leg up would cost more than the last.

"Going from [5%] to 6% would be more painful than going from four to five," he said. His reasoning: "everyone's got to pay more for money, and they'll have to roll over at higher rates, and credit spreads might go up with that a little bit."

He stressed he was not forecasting 6%. "I'm not predicting it. I'm simply saying that people need to be prepared for it."

His written remarks were more upbeat on the underlying economy. Dimon said it "continues to be fueled by strong business investment and ongoing consumer spending." He added that "large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface." In his words, "These forces may be manageable, but we remain prepared for a wide range of outcomes."

On artificial intelligence, Dimon said he understands public worry about data center locations and future jobs. He still thinks AI will "benefit mankind enormously." He acknowledged "short-run vulnerabilities" from what he called "a massive buildup," and said the value may be high enough to pay higher interest costs.

The backdrop

The quarter was shaped by AI headlines, IPO uncertainty, high fuel prices and rising borrowing costs. Brent crude was near $104.86 a barrel Tuesday, with tensions persisting in the Middle East. Heavy capital demand for the AI buildout and concern about mounting government debt have also pushed yields up this year.

The broader market was mixed pre-market. S&P 500 futures slipped 0.1% and Nasdaq-100 futures fell 0.6%. Dow futures gained about 217 points. South Korea's Kospi fell 5.5% on stretched valuations and concern that Chinese rivals are gaining ground, pulling down SK Hynix, Western Digital, Micron and others.

Bank of America and Morgan Stanley report Wednesday, Oct. 14. September inflation data is due later this week and could move Treasury yields, which have been at multidecade highs. The open question for the banks is whether Citi's higher interest income outlook holds as rates climb, or whether Dimon's warning about rollover costs starts to show up in credit quality.