JPMorgan kicked off the third quarter earnings season for US banks this morning, setting a bullish tone as it smashed expectations after capitalising on a boom in global deal making and an improvement from its consumer bank.
Managed revenue rose to $30.4 billion from $29.94 billion and net income rose to $11.22 billion from $9.02 billion. Diluted EPS jumped to $3.74 from $2.92 the year before. That was much better than the $29.76 billion in revenue and $9.03 of net income expected by Wall Street, while EPS also beat the $3.00 forecast. Earnings were boosted by $2.1 billion of reserves set aside for potentially bad loans being released, but they still beat expectations even when that boost was excluded.
Revenue from trading was down 5% from the record volumes seen last year when the pandemic caused volatility in the markets, but this was more than offset by the continued boom in M&A and IPO activity that saw its global investment banking fees soar 52%. Its credit card business also performed well as with card spending up 26% in the quarter. Plus, more normal repayment rates meant the bank earned more interest income compared to last year when it provided relief to customers and spending tightened. Demand for loans also improved after rising 1% from the previous quarter.
JPMorgan’s peers report later this week, with Bank of America, Morgan Stanley, Citigroup, Wells Fargo and US Bancorp all to report earnings tomorrow, followed by Goldman Sachs on Friday.
Blackrock, the world’s largest money manager, also beat expectations this morning after reporting strong growth in assets under management as it benefited from the continued recovery in the global economy and people deploying more funds amid rising interest in financial markets.
Revenue rose 15.8% to $5.05 billion rom $4.36 billion the year before, coming in ahead of $4.80 billion expected by analysts but marking a slowdown from the 32% growth delivered in the previous quarter as it came up against tougher comparatives. Net income and EPS both jumped 23% to $1.68 billion and $10.89, respectively, beating the $1.46 billion and $9.34 forecast by Wall Street.
Blackrock ended the quarter with $9.46 trillion worth of assets under management, up from just $7.80 billion a year earlier. It said it booked $98 billion of net inflows, driven by continued momentum for its Exchange-Traded Funds (ETFs) and equity trading. That marked 9% growth in annualised organic base fees, representing the sixth consecutive quarter it has delivered above its 5% target.
Delta Air Lines
Delta Air Lines missed expectations in the third quarter despite returning to profit and warned fuel costs are rising at a significant rate, casting doubt over the final quarter of the year.
The airline said it expects revenue to recover to the ‘low 70s percentage’ in the fourth quarter compared 2019 levels with capacity to be around 80% of pre-pandemic levels. However, it also warned that fuel prices will be between $2.25 to $2.40 per gallon in the fourth quarter, up from $1.94 in the most recent quarter amid the surge in oil prices in recent weeks – casting doubt over profitability.
Adjusted operating revenue was down 34% to $8.28 billion in the third quarter from $12.50 billion the year before, with demand suffering in August and September over concerns about the Delta variant and restrictive travel rules. That missed the $8.40 billion forecast by Wall Street. Net income fell to $1.21 billion from $1.50 billion, with adjusted EPS dropping to $1.89 from $2.31.
‘Generating a profit for the quarter even with a majority of our corporate and international customers still to return is a great achievement. I am also encouraged by our relative revenue performance, as we expect a record September quarter unit revenue premium,’ said the company. ‘Our revenue recovery has shown strong progression through the course of the year as our customers return to the skies. With robust holiday demand and an expected improvement in corporate and international demand, we expect total December quarter revenue to recover to the low 70s percentage relative to 2019.’
Boeing, American Airlines and Southwest Airlines
Boeing has said it will require all of its 125,000 US employees to be vaccinated by December 8 in order to comply with an executive order from president Joe Biden for all federal contractors to be jabbed, while some airlines have also stressed they will strive to get their staff vaccinated.
The statements come after the Republican governor of Texas Gregg Abbott issued his own executive order on Monday that said no company would have to meet vaccine mandates. American Airlines and Southwest Airlines both said will adhere to the president’s federal order as it supersedes the one issued by Abbott.
Apple shares are in play today following a report late yesterday from Bloomberg that the company could cut production of its new iPhone 13 by up to 10 million units because of supply chain problems.
The report said markets had expected Apple to produce around 90 million units of its new iPhone in the last three months of 2021 but that has been nudged down closer to 80 million because key suppliers Broadcom, which supplies wireless components, and Texas Instruments, which provides parts for screens and display, are struggling to source enough components to meet demand.
The iPhone 13 was only unveiled in September but lead times for new orders have already been longer than usual, up to around a month, amid the global chip shortage. The report said the device is unavailable for pickup in several Apple stores and that some mobile carriers are also experiencing shipping delays. The fear is that this will limit Apple’s ability to capitalise in the busy holiday season.
Notably, the world’s largest semiconductor foundry Taiwan Semiconductor Manufacturing Co – another major supplier to Apple and its partners – is set to release results later this week after warning production capacity would remain tight until next year.
Hasbro announced yesterday that its long-serving chairman and CEO Brian Goldner has died just days after leaving the business on medical leave.
Goldner had been with Hasbro since 2000 and was appointed CEO back in 2008 and then chairman in 2015. The firm described him as ‘instrumental in transforming the company into a global play and entertainment leader’.
Hasbro said last week that lead independent director Rich Stoddart had been appointed as interim CEO whilst Goldner took leave to seek medical care after being treated for cancer in 2014.
Qualcomm announced a new $10 billion share buyback programme this morning ahead of its existing programme coming to an end.
It said the existing share buyback programme that started back in July 2018 has around $900 million left to return to investors. The new $10 billion programme will begin immediately and has no expiration date.
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