JPMorgan (JPM.US), the largest US bank, released its third-quarter 2026 earnings before the market open on Tuesday, kicking off the current US earnings season. Net income for the quarter came in at $15.305 billion, up 6% from $14.39 billion a year earlier, while diluted earnings per share (EPS) reached $5.57, higher than $5.07 in the same period last year. However, the year-over-year growth failed to mask two disappointments: both revenue and adjusted EPS fell short of market expectations, and fixed income trading revenue declined year-over-year for the first time in more than two years.
Revenue rose 8% year-over-year to $50.9 billion, missing market expectations. Non-GAAP EPS was $5.75, $0.19 below consensus. The equity and bond trading businesses diverged sharply. Markets revenue for the quarter totaled $10.3 billion, up 15% year-over-year but slightly below analysts' estimate of $10.5 billion. Breaking it down, the two trading segments moved in opposite directions. Equity trading revenue reached $4.954 billion, surging 49% year-over-year to mark the best third-quarter performance on record and beat expectations, which the company attributed to strong performance across product lines, especially prime brokerage and derivatives. Fixed income trading revenue was $5.366 billion, down 4% year-over-year, the first decline in more than two years and well below market expectations of roughly $6 billion. The drop in fixed income trading was the main reason overall trading revenue missed expectations this quarter. The Federal Reserve raised rates in September to curb inflation, and the 10-year Treasury yield climbed to its highest level in nearly 25 years during the month. Rising yields depress the value of existing bonds and may also dampen client trading demand.
Net interest income remained without growth momentum, and investment banking momentum slowed. Investment banking fees totaled $3.1 billion, up 15% year-over-year and broadly in line with expectations, but down 8% quarter-over-quarter. M&A advisory fees came in above expectations, while equity and debt underwriting fees both fell short. Reuters, citing Dealogic data, reported that JPMorgan retained its top position in investment banking revenue, and noted that debt capital markets (DCM) stood out as a bright spot for the industry, with large technology companies issuing bonds in size to fund AI-related growth initiatives. Wall Street dealmakers got off to a strong start this year, most notably with Elon Musk's SpaceX historic listing. But in recent weeks, surging bond yields and a slowing IPO market have threatened what could have been a banner year for investment banking. CEO Jamie Dimon said in a statement that both investment banking fees and markets revenue grew at a mid-to-high teens percentage pace, driven by strong levels of client activity despite some slowing during the quarter. He had already noted in an interview last week that investment banking saw a slight slowdown in September. According to Bloomberg, both increases landed at the low end of the guidance range the company gave at its industry conference last month, when it projected mid-to-high teens growth for both.
Net interest income (NII) was $27.1 billion, up 13% year-over-year and above market expectations; excluding markets, NII was $24.7 billion, up 6% year-over-year, driven mainly by higher deposit balances and increased credit card and wholesale loan balances, partly offset by lower interest rates. On the cost side, another miss this quarter: non-interest expense was $27.295 billion, up 12% year-over-year, growing faster than revenue and exceeding analyst estimates. The company attributed this to higher revenue-linked compensation, front-office headcount growth, brokerage and distribution costs, marketing expenses, and increased technology investment. On capital: the signal from an 87% plunge in buybacks. Perhaps the most closely watched item this quarter was not profit but capital allocation. JPMorgan repurchased only $664 million of common stock during the quarter, a roughly 87% plunge from about $8.3 billion in the same period a year earlier. Its net payout ratio over the trailing twelve months fell to 61%, down from close to 100% previously. The dividend was maintained at $1.65 per share. Dimon put it plainly: "We reduced our stock buybacks this quarter. We believe we can deploy this capital for shareholders in the future at very attractive returns." The market widely interpreted this as the bank choosing to retain capital rather than buy back stock, given the AI arms race, technology investment, and the pending acquisition of the Apple Card portfolio. On financial metrics, the quarter also recorded a $658 million net loss on investment securities, which Dimon described in the statement as a "discretionary" loss; excluding that item on a pre-tax basis, adjusted net income was $15.8 billion and EPS was $5.75. The common equity tier 1 capital ratio (CET1, standardized approach) stood at 13.9%, and book value per share was $132.30, up 6% year-over-year.
By business line, all three main segments posted year-over-year growth. Consumer and Community Banking (CCB) net revenue was $21.171 billion, up 9%, with net income of $5.670 billion, up 13%. Corporate and Investment Bank (CIB) net revenue was $22.734 billion, up 14%, with net income of $8.247 billion, up 20%, including a 16% increase in banking and payments revenue. Asset and Wealth Management (AWM) net revenue was $6.909 billion, up 14%, with net income of $1.843 billion, up 11%, assets under management (AUM) of $5.2 trillion, up 13% year-over-year, and net inflows of client assets of $263 billion. The corporate segment posted a net loss of $455 million, mainly due to the investment securities losses mentioned above.
For US banking, the bellwether gave three signals. As the largest US bank, JPMorgan typically sets the tone for earnings season. Its results, together with Wells Fargo's (WFC.US) report released the same day, offer three signals for the US banking industry. Signal one: the pullback from peak trading revenue has arrived. JPMorgan's total trading revenue still rose 15% year-over-year, but it retreated noticeably from the record high in the second quarter. According to reports, analysts expect the five largest US investment banks, JPMorgan, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America, to post combined equity and fixed income trading revenue of about $38 billion in the third quarter, up about 13% year-over-year but down sharply from the record of about $47 billion in the second quarter. In investment banking, JPMorgan's fees fell 8% quarter-over-quarter, while Bank of America has warned that its investment banking fees could decline about 10% year-over-year, a clear divergence. Signal two: the seesaw in net interest income remains favorable, but risks are rising. Wells Fargo's net interest income was $12.517 billion for the quarter, up 5% year-over-year, as the bank benefited from more fully utilizing its balance sheet after the Fed lifted its asset cap. JPMorgan's NII rose 13% year-over-year and beat expectations. But after the Fed raised rates in September to a range of 3.75%-4.00%, the first increase since 2023, rising deposit costs and unrealized losses on bond portfolios are becoming two-way pressures. Signal three: credit and consumer conditions have yet to show cracks. Wells Fargo posted net income of $5.951 billion and EPS of $1.87, up 13% year-over-year and above market expectations. But its revenue of $21.870 billion missed expectations, and its provision for credit losses rose to $1.029 billion, up 51% from $681 million a year earlier. CEO Charlie Scharf said consumer spending is rising, loan delinquency rates are low, and deposit and investment balances are growing, while cautioning that higher rates, higher oil prices and persistent inflation pose risks to the economy, though strong positive forces such as AI infrastructure investment, high employment levels and steady wage growth still outweigh the risks. At the sector level, bank stock performance has diverged from fundamentals: the KBW Bank Index has fallen more than 12% from its August high.
Implications for the US economy: consumer banking growth continues and credit quality remains healthy, while high-rate risks build. JPMorgan's results also serve as an early diagnosis of the US economy. Dimon noted in the statement: "Large fiscal deficits, sticky inflation, elevated asset prices, rising rates and geopolitical conditions continue to evolve beneath the surface. These forces may be manageable, but we remain prepared for a range of possible outcomes." On the positive side, Dimon said the US economy continues to be driven by strong business investment and sustained consumer spending, supported by a 10% year-over-year increase in average loans and 15% growth in credit card and auto revenue. On the risk side, after the Fed raised rates in September and signaled more tightening, combined with surging bond yields, higher borrowing costs and tighter financial conditions could push some borrowers out of the credit market. JPMorgan's average loans rose 10% year-over-year to $1.6 trillion, and average deposits rose 8% year-over-year to $2.7 trillion. This shows the US economy has performed better than expected so far, with a stable labor market and healthy consumer spending, sustaining the lending business that is critical to the industry. Credit quality was broadly solid: the provision for credit losses was $2.743 billion, down from $3.403 billion a year earlier and slightly above $2.5 billion in the prior quarter. Within that, net charge-offs were $2.2 billion, down $389 million year-over-year, mainly from wholesale. Net reserve builds were $539 million, compared with $810 million a year earlier. The credit card net charge-off rate fell to 2.91% from 3.15% a year earlier, CCB provisions fell 20% year-over-year to $2 billion, and the quarter added more than 650,000 net new checking accounts. A notable new variable is AI. On one hand, large technology companies are issuing debt heavily to finance AI, becoming a bright spot for investment banking. On the other hand, the market has begun discussing the potential impact of AI agents on banks' low-cost deposits. Apollo chief economist Torsten Slok has suggested that if households widely use AI agents to optimize cash yields, banks could lose a large amount of cheap deposits, in turn shaking the entire financial system. Bank of America analyst Ebrahim Poonawala said on October 4 that over the long term banks will build their own agent interfaces to hedge this threat, adding that banks may need to build for agents, not just for customers. Looking ahead, JPMorgan expects fourth-quarter net interest income of about $28 billion and full-year net interest income of about $106.2 billion, above market expectations of $105.28 billion. At the same time, the company expects full-year adjusted expenses of about $108.6 billion, above its previous forecast of $107.5 billion. Management reiterated that it expects the 2026 credit card net charge-off rate to be about 3.2%, below its previous expectation of nearly 3.4% and last year's level, reflecting better-than-expected consumer credit performance. Previously, credit card losses had been a concern as consumers adjusted to high borrowing costs and accumulating debt.
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