JPMorgan reports another quarter of record net interest income

With a boost from higher interest rates and its purchase of First Republic Bank, the firm raised its forecast for the year.

JPMorgan Chase & Co. posted another quarter of record net interest income and boosted its forecast for the year as the company benefits from higher interest rates and its purchase of First Republic Bank.

NII was $22.9 billion in the three months through Sept. 30, above analysts’ expectations. The biggest U.S. bank said it now expects to generate $88.5 billion from the revenue source this year.

“We acknowledge that these results benefit from our over-earning on both net interest income and below normal credit costs, both of which will normalize over time.,” Chief Executive Jamie Dimon said in a statement.

The CEO warned that the wars in Ukraine and the Middle East could have far-reaching consequences. “This may be the most dangerous time the world has seen in decades,” he said.

JPMorgan’s results mirror similar gains at Wells Fargo & Co., which reported Friday that net interest income — the difference between what a bank earns on loans and the amount it pays out on deposits — also topped estimates. The third-quarter reports offer the latest look at how consumers and businesses are faring as the Federal Reserve leaves borrowing costs higher for longer than most economists had predicted.

Shares of JPMorgan, up 8.7% this year through Thursday, climbed 0.8% in early New York trading. Wells Fargo jumped 2.4%.

JPMorgan also provided a snapshot of how the company is integrating First Republic Bank, which it purchased in a government-led auction in May. Dimon said in August that the process had been “excellent,” and that the regional bank turmoil that led to First Republic’s collapse is “over for now.” The bank said Friday that net income attributable to First Republic was $1.1 billion in the third quarter.

Friday also kicks off the first round of bank earnings since U.S. regulators proposed a new set of capital rules that would force the eight largest lenders to boost the amount they set aside by about 19%. Wall Street executives have said the increased requirements would slow the economy. Investors are keen for further executive commentary on what the possible fallout might be.

JPMorgan said total loans rose 18% from a year earlier. Deposits fell 1%.

The lender reported $1.5 billion in net charge-offs, citing credit-card loans for the increase. Dimon said last month that higher card losses are “normalization” from exceptionally low levels in recent years, and that his firm has been “over-earning on credit.” JPMorgan reduced the pile of money set aside for potentially soured loans by $113 million, while analysts had expected a reserve build.

Markets revenue fell from a year ago, driven by a 10% drop in equity trading. That was partially offset by a surprise 1% gain for fixed-income traders, while analysts had expected a slight drop. JPMorgan attributed the gain to higher revenue in securitized products and credit.

The results also included $669 million in net investment securities losses and $665 million of legal expenses.

The firm lowered its full-year adjusted expense guidance to about $84 billion, excluding a planned Federal Deposit Insurance Corp. special assessment tied to regional bank failures earlier this year. JPMorgan had previously said it expected the metric, which excludes legal costs, to come in at about $84.5 billion for the year.

[More: JPMorgan’s deal for First Republic fuels Dimon’s wealth management ambitions]