Amid the global bond market storm, "Wall Street bellwether" JPMorgan (JPM.US) was the first to feel the chill in its earnings.

Title context: Amid the global bond market storm, "Wall Street bellwether" JPMorgan (JPM.US) was the first to feel the chill in its earnings. Text: JPMorgan (JPM.US), the largest U.S. bank, released its third-quarter 2026 financial report before the U.S. market opened on Tuesday, kicking off this round of U.S. earnings season. Net profit for the quarter was $15.305 billion (compared with $14.39 billion a year earlier), up 6% year over year; diluted earnings per share (EPS) was $5.57, higher than $5.07 a year earlier. But "year-over-year growth" failed to conceal two misses: both revenue and adjusted earnings per share came in below market expectations, and fixed-income trading revenue fell 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 earnings per share was $5.75, $0.19 below market expectations. The equities and bonds trading businesses were "a tale of two extremes" Markets revenue for the quarter was $10.3 billion, up 15% year over year, slightly below analysts' estimate of $10.5 billion. Broken down, the two trading segments moved in opposite directions. Equities trading revenue was $4.954 billion, up 49% year over year, the best third-quarter performance on record and above expectations - the company attributed this 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 clearly below market expectations of about $6 billion. The decline 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 U.S. Treasury yield rose during the month to its highest level in nearly 25 years; rising yields the value of existing bonds and may also dampen client trading demand. Net interest income still lacks growth momentum, investment banking momentum slows Investment banking fee revenue was $3.1 billion, up 15% year over year, broadly in line with expectations, but down 8% from the second quarter. Among these, M&A advisory fees were above expectations, while both equity and debt underwriting fees were below expectations. Reuters, citing Dealogic data, said JPMorgan retained the top spot in investment banking revenue; the report also noted that debt capital markets (DCM) became a conspicuous bright spot for the industry - large technology companies are issuing bonds heavily to finance AI-related growth plans. Wall Street dealmakers got off to a strong start this year, most notably Elon Musk's SpaceX historic listing. But in recent weeks, bond yields have surged and the IPO market has slowed, threatening what could have been a stellar year for investment banking. CEO Jamie Dimon said in the statement that both investment banking fees and markets revenue achieved "mid-to-high teens" growth, "helped by strong levels of client activity, although activity slowed during the quarter." In an interview last week, he had already mentioned that investment banking saw a "slight slowdown" in September. According to Bloomberg, both increases fell at the lower end of the range the company gave at its industry conference last month - at the time, the company expected both to grow at a mid-to-high teens level. Net interest income (NII) was $27.1 billion, up 13% year over year, above market expectations; excluding markets, it was $24.7 billion, up 6% year over year, with growth mainly from higher deposit balances and increased credit card and wholesale loan balances, partly offset by the impact of lower rates. On the cost side, there was another miss this quarter: noninterest expense was $27.295 billion, up 12% year over year, growing faster than revenue and exceeding analysts' estimates. The company attributed this to revenue-linked compensation, front-office headcount growth, brokerage and distribution fees, marketing expenses and higher technology investment. 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 in the quarter, down about 87% from about $8.3 billion a year earlier; the net payout ratio over the past twelve months fell to 61% (previously close to 100%). The dividend was maintained at $1.65 per share. Dimon put it bluntly: "We reduced 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 meaning that, in the face of the AI arms race, technology investment and the pending acquisition of the Apple Card portfolio, the bank chose to retain capital rather than buy back stock. On financial metrics, the quarter also recorded a $658 million net investment securities loss, which Dimon called a "discretionary" loss in the statement; excluding this item (pre-tax), adjusted net profit was $15.8 billion and EPS was $5.75. The common equity tier 1 capital ratio (CET1, standardized approach) was 13.9%, and book value per share was $132.30, up 6% year over year. By business line, all three main lines achieved year-over-year growth: Consumer and Community Banking (CCB) net revenue was $21.171 billion (+9%), net profit was $5.670 billion (+13%); Corporate and Investment Bank (CIB) net revenue was $22.734 billion (+14%), net profit was $8.247 billion (+20%), with banking and payments revenue up 16%; Asset and Wealth Management (AWM) net revenue was $6.909 billion (+14%), net profit was $1.843 billion (+11%), assets under management (AUM) reached $5.2 trillion, up 13% year over year, with net inflows of client assets of $263 billion. The corporate segment posted a net loss of $455 million, mainly due to the aforementioned securities investment losses. For Bank of America Corp: three signals from the bellwether As the largest U.S. bank, JPMorgan typically sets the tone for earnings season. Its report, together with Wells Fargo & Company's (WFC.US) results released the same day, gave three signals for Bank of America Corp. Signal one: the "pullback from highs" in trading revenue has already landed. JPMorgan's total trading revenue still rose 15% year over year, but it has clearly retreated from the record high in the second quarter. According to reports, analysts expect the five largest U.S. investment banks (JPMorgan, Goldman Sachs Group, Inc., Morgan Stanley, Citigroup, Bank of America Corp) to report combined equities and fixed-income trading revenue of about $38 billion in the third quarter, which, although up about 13% year over year, is clearly down from the record about $47 billion in the second quarter. In investment banking, JPMorgan's investment banking fees fell 8% quarter over quarter, while Bank of America Corp has warned that its investment banking fees could fall about 10% year over year, a clear divergence. Signal two: the "seesaw" in net interest income remains favorable, but risks are rising. Wells Fargo & Company's net interest income for the quarter was $12.517 billion, up 5% year over year (the bank benefited from making fuller use of its balance sheet after the Federal Reserve lifted its asset cap); JPMorgan's NII rose 13% year over year and beat expectations. But after the Federal Reserve raised rates in September to 3.75%-4.00% (the first time since 2023), rising deposit costs and unrealized losses on bond portfolios are becoming two-way pressures. Signal three: credit and consumption have not yet shown cracks. Wells Fargo & Company's net profit for the quarter was $5.951 billion and EPS was $1.87 (+13% year over year), beating market expectations; but its revenue of $21.870 billion was below expectations, and its provision for credit losses rose to $1.029 billion ($681 million a year earlier, +51%). CEO Charlie Scharf said, "Consumer spending is increasing, loan delinquency rates are low, and deposit and investment balances are growing," while also warning that "higher rates, higher oil prices and persistent inflation pose risks to the economy, but strong positive forces such as AI infrastructure investment, high employment levels and steady wage growth still outweigh the risks." At the sector level, bank stocks' performance has diverged from fundamentals: the KBW Bank Index has fallen more than 12% from its August high. Implications for the U.S. economy: consumer banking growth, credit quality still healthy; high-rate risks are building JPMorgan's earnings are also an early diagnosis of the U.S. economy. Dimon noted in the statement: "Huge 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 all possible outcomes." On the positive side, Dimon said "the U.S. economy continues to be driven by strong business investment and sustained consumer spending," supported by average loans up 10% year over year and credit card and auto revenue up 15%. On the risk side, after the Federal Reserve 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 in Q3 to $1.6 trillion; average deposits rose 8% year over year to $2.7 trillion. This shows that the U.S. economy has so far performed unexpectedly well, the labor market has remained stable, and consumer spending remains healthy, thereby sustaining the lending business that is crucial to the industry. Credit quality was broadly solid: the provision for credit losses in the quarter was $2.743 billion, below $3.403 billion a year earlier and slightly above $2.5 billion in the previous quarter. Among this, net charge-offs were $2.2 billion, down $389 million year over year (mainly from wholesale); net reserve build was $539 million, compared with $810 million a year earlier. The credit card net charge-off rate fell to 2.91% (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 noteworthy new variable is AI. On the one hand, large technology companies are issuing debt intensively to finance AI, becoming a bright spot in 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 hitting the entire financial system. Bank of America Corp analyst Ebrahim Poonawala said on October 4 that in the long run banks will build their own agent interfaces to hedge this threat, and 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 the 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.