JP Morgan: diversification is the driving force. Focus on credit risk

Yes, the figures. But what are the underlying causes across the various business areas? Looking at Consumer & Community Banking, growth was driven, on the one hand, by higher profitability on deposits; and, on the other, by fees relating to asset management. The still-favourable spread between lending and deposit rates, despite the Fed’s start to monetary tightening, supported the net interest margin. At the same time, the bank benefited from the strong performance of asset management and the strengthening of its leadership in retail deposits in the United States. The credit card and leasing business also performed well, benefiting from increased consumer spending and the strength of the automotive market. By contrast, the residential mortgage segment (-3 per cent) underperformed, hampered by continued weak demand and lower margins. As for the Corporate & Investment Banking division, there was a recovery in investment banking activities and an excellent performance in the financial markets. In particular, within this division, bond trading (+21 per cent) posted solid results, whilst equity trading recorded growth (+33 per cent) thanks to the return of activity from funds and institutional clients. The performance of securities custody and administration services was also positive, having benefited from increased volumes and the recovery of global stock markets. Finally: Asset & Wealth Management. This division benefited from higher management fees and the strong performance of the financial markets. Assets under management (+18 per cent) and total client assets (+20 per cent) rose, thanks to positive net inflows and the confidence of private and institutional clients. More generally, the bank continued to expand its network of advisers and invest in technology to strengthen the digital platform dedicated to wealth management.

So, is it all as easy as drinking a glass of water? The reality is more complicated. First and foremost, there is the slowdown in the mortgage business. True! It is precisely this diversification of the business that has made it possible to counterbalance the negative trend. However, the outlook is not positive. So much so that Dimon himself indicated that the bank aims to ‘reduce mortgage costs by 30–40 basis points’ to revive the market without increasing credit risk. What’s more. Another area of concern relates to corporate lending. During the quarterly results call with analysts, the bank reported an increase in provisions for corporate loans and a number of isolated cases of fraud in secured lending, citing in particular the default by the automotive company Tricolor Auto Group. A development which, as reported by Reuters, resulted in losses of around $170 million for JP Morgan. The same JP Morgan which, overall and specifically with regard to credit quality, saw the following increases in the third quarter: — its loan loss provisions to $3.4 billion, comprising $2.6 billion in actual net losses and a net increase in reserves of $810 million. The bank explained that the rise in the ‘cost of credit’ reflects, on the one hand, one-off write-downs linked to fraud in secured loans; and, on the other, ‘a prudent approach’ to anticipate the impact of a possible downturn in the economic cycle. That said, however, analysts at Bloomberg Intelligence note that the growth in provisions ‘could signal a faster-than-expected normalisation of credit conditions’. Put another way: we are emerging from an exceptionally positive situation, and lending is returning to behaviour typical of a normal economic cycle, with more defaults and lower credit quality. It is therefore clear that – despite the bank’s reassurances – at present, the DIY saver must pay close attention to this trend. The trend in operating costs, on the other hand, does not appear to be a cause for concern. Of course! Some analysts have highlighted the increase (+11 per cent) in expenses at Cib or at Ccb itself (+7 per cent). However, on this front, it cannot be denied that – overall and again in the third quarter of 2025 – the ‘Non-interest expense’ item rose by less (+8 per cent) than revenues (+9 per cent). A trend which – inevitably – has improved the bank’s cost-to-income ratio.

So far, we’ve looked at some insights into the business and its corporate dynamics. But what are the company’s stock market multiples? According to Seeking Alpha, the forward price-to-book ratio for 2025 is 2.4 times. In other words, this figure is higher than that of the benchmark sector. Furthermore, the current dividend yield (i.e. the sum of dividends paid over the last 12 months divided by the share price) stands at 1.86 per cent. This percentage is lower than that of the sector used for comparison. On the other hand, momentum ‘is strong’, Seeking Alpha adds, ‘and earnings revisions are promising’. With regard to the latter, in fact, ‘there have been 16 upward revisions to EPS’, reflecting ‘optimism about the bank’s future profitability prospects’. In such a scenario, investors must – obviously – proceed with great caution and assess – as always – their own risk appetite. Investing in venture capital requires, first and foremost, the question: how much are you prepared to lose? Only then can one consider all the possible strategies.

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