The Zhitong Finance App learned that the largest bank in the US, J.P. Morgan Chase (JPM.US), released its financial report for the third quarter of 2026 before the US stock market on Tuesday, kicking off the US stock earnings season. Net profit for the quarter was $15.305 billion ($14.39 billion in the same period last year), up 6% year over year; diluted earnings per share (EPS) was $5.57, up from $5.07 in the same period last year.
However, the “year-on-year increase” failed to cover up two failures: both revenue and adjusted earnings per share fell short of market expectations, and revenue from fixed income transactions fell year on year for the first time in more than two years. Revenue increased 8% year over year to $50.9 billion, falling short of market expectations. Non-GAAP earnings per share were $5.75, which was $0.19 below market expectations.
Stock and bond trading business “two heavens of ice and fire”
Markets' revenue for the quarter was $10.3 billion, up 15% year over year, slightly below analysts' expectations of $10.5 billion. Taken apart, the two trading sectors are in diametrically opposite directions. Stock trading revenue of $4.954 billion, up 49% year over year, set the best third-quarter performance on record and surpassed expectations — the company attributed this to “strong performance across product lines, particularly Prime and derivatives.” Revenue from fixed income transactions was $5.366 billion, down 4% year over year, the first decline in more than two years, and was significantly lower than market expectations of about $6 billion.
The decline in fixed income transactions was the main reason why overall transaction revenue fell short of expectations this season. The Federal Reserve raised interest rates in September to curb inflation, and the 10-year US Treasury yield once rose to the highest level in nearly 25 years this month; rising yields will depress the value of existing bonds and may also curb customers' trading needs.
Net interest income is still not driving growth, and the investment banking business momentum is slowing
Investment bank fee revenue was 3.1 billion US dollars, up 15% year on year. Basically in line with expectations, but it was 8% month-on-month lower than in the second quarter. Among them, M&A advisory fees were higher than expected, and underwriting expenses for stocks and bonds were lower than expected. Reuters quoted Dealogic data as saying that J.P. Morgan has maintained the number one position in investment banking revenue; the report also mentioned that the debt capital market (DCM) has become a prominent highlight in the industry — large technology companies are financing AI-related growth plans and issuing large amounts of bonds.
Wall Street's deal makers had a strong start to the year, most notable of which was the historic listing of Elon Musk's SpaceX. However, in recent weeks, bond yields have soared and the growth rate of the IPO market has slowed, threatening the promising year the investment banking industry may have ushered in.
CEO Jamie Dimon (Jamie Dimon) said in a statement that investment bank fees and market business revenue both achieved a “high to medium level” increase, “thanks to a strong level of customer activity, despite a slowdown in activity during the quarter.” He mentioned in an interview last week that the investment banking business experienced a “slight slowdown” in September. According to Bloomberg, both increases fell below the expected range given by the company at last month's industry conference — at the time, the company expected both to grow at medium to high levels of about ten percent.
Net interest income (NII) was US$27.1 billion, up 13% year on year, higher than market expectations; after excluding market business, it was US$24.7 billion, up 6% year over year. The increase was mainly due to rising deposit balances and higher credit card and wholesale loan balances, partly offset by lower interest rates.
On the cost side, there was another failure this season: non-interest expenses were $27.295 billion, up 12% year over year. The growth rate was higher than revenue and exceeded analysts' estimates. The company attributed the increase in revenue-linked remuneration, front desk staff growth, brokerage and distribution expenses, marketing expenses, and technology investment.
Capital: A sign that repurchases have plummeted by 87%
Perhaps what has received the most attention this season is not profit, but capital allocation. J.P. Morgan only bought back $664 million of common stock during the quarter, a sharp drop of about 87% from about $8.3 billion in the same period last year; the net dividend payout ratio for the past 12 months fell to 61% (previously close to 100%). The dividend was maintained at $1.65 per share.
Dimon put it bluntly: “We have reduced share buybacks this season. We believe this capital can be allocated to shareholders in the future with very attractive returns.” The market generally interprets this as banks choose to keep capital rather than buy back stocks in the face of uses such as an AI arms race, technology investment, and an Apple Card combination to be completed.
In terms of financial indicators, the quarter also recorded a net investment securities loss of US$658 million, which Dimon called an “autonomous decision-making” loss in a statement; if this item (before tax) is excluded, adjusted net profit of US$15.8 billion and EPS of US$5.75. The Tier 1 capital adequacy ratio for common shares (CET1, standard law) was 13.9%, with a book value of $132.30 per share, an increase of 6% over the previous year.
By business, all three main lines achieved year-on-year growth: Consumer and Community Banking (CCB) net revenue of US$21.171 billion (+9%), net profit of US$5.670 billion (+13%); corporate and investment banking (CIB) net revenue of US$22.734 billion (+14%), net profit of US$8.247 billion (+20%), of which banking and payment revenue increased 16%; asset and wealth management (AWM) net revenue of US$6.909 billion (+14%), net profit of US$1,843 billion (+11%) Assets under management (AUM) reached 5.2 trillion US dollars, an increase of 13% year over year, with a net inflow of customer assets of $263 billion. The corporate sector had a net loss of US$455 million, mainly due to the loss of investment in the securities mentioned above.
To the US banking industry: Three signals from the weather vane
As the largest bank in the US, J.P. Morgan usually sets the tone for the earnings season. The financial report, along with Wells Fargo Bank (WFC.US) results released on the same day, gave three signals to the US banking industry.
Signal 1: The “high decline” in transaction revenue has come to fruition. J.P. Morgan Chase's total transaction revenue still increased 15% year over year, but it has clearly retreated from the record high in the second quarter. According to reports, analysts expect the total revenue of the five major US investment banks (J.P. Morgan Chase, Goldman Sachs, Morgan Stanley, Citibank, and Bank of America) to total about 38 billion US dollars in the third quarter. Although this is an increase of about 13% year over year, this is a significant decrease from the record of about 47 billion US dollars in the second quarter. In terms of investment banks, J.P. Morgan Chase Investment Bank fees fell 8% month-on-month. Bank of America has warned that its investment banking fees may drop by about 10% year over year, with obvious differentiation.
Signal 2: The “seesaw” of net interest income is still favorable, but risks are rising. Wells Fargo's net interest income for the quarter was $12.517 billion, up 5% year over year (the bank benefited from the full use of the balance sheet after the Federal Reserve lifted its asset size cap); J.P. Morgan NII grew 13% year over year and was higher than expected. However, after the Federal Reserve raised interest rates to 3.75%-4.00% in September (the first time since 2023), rising deposit costs and falling losses in the bond portfolio are putting pressure on both sides.
Signal 3: There is no gap between credit and consumption. Wells Fargo's net profit for the quarter was US$5.951 billion and EPS of US$1.87 (+13% YoY), exceeding market expectations; however, its revenue of US$218.70 billion fell short of expectations, and provision for credit losses rose to US$1,029 million ($681 million last year, +51%). The bank's CEO Charlie Scharf (Charlie Scharf) said, “Consumer spending is increasing, loan overdue rates are low, and deposit and investment balances are growing,” and suggested that “higher interest rates, higher oil prices, and continued inflation pose risks to the economy, but strong positive forces such as AI infrastructure investment, high employment levels, and stable wage growth still outweigh the risks.”
At the sector level, the performance of bank stocks diverged from fundamentals: the KBW Bank Index has fallen by more than 12% from its August high.
Implications for the US economy: Consumer banking business is growing, credit quality is still healthy; risk of high interest rates accumulates
J.P. Morgan's earnings report is also an early diagnosis of the US economy. In a statement, Dimon stated, “Huge fiscal deficits, sticky inflation, high asset prices, rising interest rates, and geopolitical conditions continue to evolve below the surface. These forces may be under control, but we are still prepared for all possible outcomes.”
On the positive side, Dimon said “the US economy continues to be driven by strong corporate investment and continued consumer spending,” as evidenced by a 10% year-on-year increase in average loans and a 15% increase in credit card and auto business revenue. On the risk side, after the Federal Reserve raised interest rates in September and released more signs of austerity, the combination of soaring bond yields, higher borrowing costs and tighter financial conditions may push some borrowers out of the credit market.
J.P. Morgan's Q3 average loans increased 10% year over year to 1.6 trillion US dollars; average deposits increased 8% year over year to 2.7 trillion US dollars. This shows that the US economy has performed unexpectedly so far. The labor market has remained stable, and consumer spending is still healthy, thus maintaining the operation of the industry's critical loan business.
Credit quality was generally stable: Credit loss provisions for the quarter were US$2,743 billion, down from US$3.403 billion in the same period last year, and slightly higher than US$2.5 billion in the previous quarter. Of this, net write-off was US$2.2 billion, a year-on-year decrease of US$389 million (mainly from wholesale business); net provisions amounted to US$539 million, compared to US$810 million in the same period last year. The net credit card write-off rate fell to 2.91% (3.15% in the same period last year), CCB business provisions fell 20% year over year to US$2 billion, and more than 650,000 new net checking accounts were added during the quarter.
A notable new variable is AI. On the one hand, large technology companies are intensively issuing bonds for AI financing, which has become a highlight of the investment banking business; on the other hand, the market is beginning to discuss the potential impact of AI agents (AI agents) on banks' low-cost deposits — Apollo (Torsten Slok) chief economist Torsten Slok (Torsten Slok) once proposed that if households generally use AI agents to optimize cash income, banks may lose large amounts of cheap deposits, which in turn affects the entire financial system. Bank of America analyst Ebrahim Poonawala (Ebrahim Poonawala) pointed out on October 4 that in the long run, banks will build their own proxy interfaces to hedge against this threat. “Banks may need to build them as agents, not just customers.”
Looking ahead, J.P. Morgan expects net interest income for the fourth quarter to be around $28 billion, and net interest income for the full year is about $106.2 billion, higher than the market forecast of $105.28 billion. Meanwhile, the company expects adjusted expenses for the full year to be approximately US$108.6 billion, higher than the previous forecast of US$107.5 billion.
Management reiterated that it expects a net credit card write-off rate of around 3.2% in 2026, which is lower than the previous forecast of nearly 3.4% and last year's level, reflecting better-than-expected consumer credit performance. Credit card losses have previously been a source of concern as consumers adjust to high borrowing costs and accumulated debt.