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JPMorgan sharpens edge on rivals in months jarred by market tumult

New York

MONTHS of market turmoil are pushing JPMorgan Chase & Co even further ahead of the Wall Street pack.

The firm led by Jamie Dimon, which has built up its dominance in recent years, widened its edge on a variety of fronts in the third quarter, sending its shares to an all-time high on Tuesday.

The bank posted its biggest increase in revenue from fixed-income trading in almost three years, maintaining a more-than US$1 billion lead on competitors across markets. It also announced a surprise jump in fees from investment banking, scoring its biggest advantage over Goldman Sachs Group Inc in more than a year in the high-stakes business.

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KBW analyst Fred Cannon said in a television interview: "JPMorgan stacks up very well relative to its competitors in the US, particularly in the capital-markets area."

Analysts had predicted industry results that would match a particularly tough quarter for Wall Street's main businesses - wracked by volatility in fixed-income markets, global trade tensions that weighed on cross-border deals and investor jitters that tripped up some of the year's most anticipated public stock offerings.

But JPMorgan and Citigroup Inc leaned on debt underwriting units for fees; Goldman Sachs found relief in stock trading, where it surpassed expectations.

Two more giant firms - Bank of America Corp and Morgan Stanley - report their results on Wednesday and Thursday.

In the meantime, JPMorgan's shares climbed, and were up 3.5 per cent at 2.42 pm in New York, the biggest jump since April.

The New York-based bank has long been known as a fixed-income powerhouse on both the trading and underwriting fronts, which helped establish it as the top Wall Street company by revenue after the financial crisis. Its strength in fixed-income in the quarter was offset by a surprise 5 per cent decline in equity-trading revenue, which the bank blamed on derivatives. Analysts had been expecting a 5 per cent increase.

In recent years, JPMorgan has been investing in technology and sharpening its focus on trade execution, trying to unseat Morgan Stanley as Wall Street's top stock-trading shop. And as the pool of trading revenue has shrunk across the industry, Mr Dimon has focused his attention on investment banking, with the aim of putting the bank at No.1 in any area where it does not already have pole position - while defending its position in debt capital markets.

In the third quarter, JPMorgan also generated the highest profit from its consumer unit in more than five years, as mortgage fees climbed and loan charge-offs fell from the second quarter.

Here are the main takeaways as four of the six biggest US banks reported results:

  • Goldman Sachs: The firm's trading rebound was overshadowed by a bigger slide in banking fees than analysts had projected, and a US$267 million hit on public equity investments such as ride-hailing company Uber Technologies Inc, Avantor Inc and Tradeweb Markets Inc. The firm's shares rose 0.7 per cent.
  • Citigroup: Citi's efforts to rein in costs - including cutting almost 400 trading jobs - have not borne fruit yet. Expenses ticked up 1.5 per cent to exceed analysts' estimates. Still, its shares climbed 2.2 per cent as its investment bankers posted a surprise increase in revenue, led by a 7 per cent jump in debt underwriting.
  • Wells Fargo: The company took another chunky legal charge as it addressed recent scandals ahead of the arrival of its new CEO Charlie Scharf.

The US$1.6 billion litigation expense dragged down earnings, along with a bigger-than-expected drop in net interest income as the lender felt the sting of Federal Reserve rate cuts. Revenue, at least, surpassed analysts' estimates, and the lender attracted more deposits. Shares climbed 2.5 per cent. BLOOMBERG