JPMorgan Chase posted earnings for the third quarter far above estimates on Wall Street Thursday, but shares dropped as traders focused in on the bank’s big decline in revenue from trading.
JPMorgan’s per share earnings ended the quarter at $1.76 compared to Wall Street estimates of $1.65. Revenue came in at over $26.2 billion in comparison to the Street estimate of $25.23 billion.
Shares fell briefly by 0.9% in trading before the opening bell on Thursday, after increasing slightly prior to the release of earnings.
Revenue from fixed income trading fell over 27% to end the quarter at $3.16 billion, which was far worse than $3.25 billion that Wall Street projected.
The bank said that lower revenue in all its products was driven through the sustained low volatility and credit spreads that were much tighter.
Revenue from equities trading was down 4% reflecting less revenue in its derivatives which was offset for the most part by strength in Cash Equities and Prime Services. The drop comes following a strong 2016 third quarter.
Revenue from trading overall fell by 16% during the quarter.
CEO and chairman Jamie Dimon in September warned that trading revenue had dropped by 20% during the three-month period.
Last month was the least volatile ever posted for the S&P 500, as the daily range averaged just 0.4%, said one senior strategist.
Dimon made no comments on any specifics related to trading results in the press release on Thursday, but praised the lead by the bank in consumer banking.
The company, for just the first time, led the country in total deposits in the U.S., as businesses and consumers continue to look at the bank as the choice for a banking partner, said Dimon in his statement.
Another figure watched by traders in the results for JPMorgan was its net interest income, which is an important measure for a bank’s profitability.
Shares fell after the earnings report for the second quarter this past July after the bank reduced its forecast for net interest income for the full year by close to $500,000 to an increase of $4 billion from the previous year.
JPMorgan shares are higher by 12% in 2017 and surged by over 38% since the 2016 presidential election to new record highs.
Overall bank stocks have surged since the election last November. Promises made by President Donald Trump of stimulus and the move by the Federal Reserve towards tighter monetary policy helped the yield of Treasuries to rise, which in turn helps increase banks’ profit margins.