And Q3 earnings season is off with a mixed report from JPMorgan, which moments ago reported results that showed a surprising drop in FICC trading revenue which sent the stock sliding in the premarket trading, but then promptly erased the entire loss after the company revealed Net Interest Income guidance that came about $1 billion higher than expected.

Let's start at the top. 

The largest US bank reported Q3 revenue and earnings which unexpectedly missed both on the top and bottom line, driven by a surprise drop in the bank's FICC (fixed-income, currency and commodity), the first such decline in more than two years. The fixed-income top-line fell 4% from a year earlier, bringing total trading revenue to $10.3 billion for the period, while analysts were expecting $10.5 billion.

Here are the details:

• Adjusted revenue $50.91 billion, +8% y/y, missing estimates of $51.37 billion
• FICC sales & trading revenue $5.37 billion, missing estimates of $6 billion
• Equities sales & trading revenue $4.95 billion, beating estimates of $4.47 billion
• Investment banking revenue $3.10 billion, +15% y/y, missing estimates of $3.27 billion
• Advisory revenue $1.22 billion, +32% y/y, beating estimates of $1.14 billion
• Equity underwriting rev. $564 million, +7% y/y, missing estimates of $646.4 million
• Debt underwriting rev. $1.22 billion, +3.8% y/y, missing estimates of $1.24 billion
• Managed net interest income $27.15 billion, +13% y/y, estimate $26.87 billion
  
• Adjusted EPS $5.75, (GAAP EPS $5.57) missing estimates of $5.93

The 15% climb in total trading revenue and 14% jump in investment-banking fees came in at the lower end of the range the firm telegraphed at an industry conference last month. At the time, JPMorgan saw both rising by a percentage in the mid to high teens.

The bank's Q3 results also included $658 million of net investment securities losses that Dimon called “discretionary” in the statement.

Some more details on the bank's "fortress balance sheet":

• Loans $1.58 trillion, +10% y/y, estimate $1.56 trillion
• Total deposits $2.78 trillion, +2.5% q/q, estimate $2.73 trillion
• Provision for credit losses $2.74 billion, -19% y/y, estimate $2.79 billion
• Net charge-offs $2.20 billion, -15% y/y, estimate $2.48 billion
• Compensation expenses $14.77 billion, +8.9% y/y, estimate $15 billion
• Non-interest expenses $27.30 billion, +12% y/y, estimate $27.18 billion
• Net yield on interest-earning assets 2.48% vs. 2.45% y/y, estimate 2.47%
• Standardized CET1 ratio 13.9% vs. 14.8% y/y
• Managed overhead ratio 54% vs. 52% y/y, estimate 52.6%
• Return on equity 17% vs. 17% y/y, estimate 17.8%
• Return on tangible common equity 20% vs. 20% y/y, estimate 21%
• Assets under management $5.21 trillion, +13% y/y, estimate $5.27 trillion
• Tangible book value per share $112.64 vs. $105.70 y/y, estimate $115.18
• Book value per share $132.30 vs. $124.96 y/y, estimate $134.93
• Cash and due from banks $21.26 billion, -14% q/q, estimate $25.96 billion

Taking a look at the bank's all important Commercial and Investment bank where the big FICC and several Investment Banking misses were, we find the following:

Markets & Securities Services revenue

• Markets revenue of $10.3B, up 15% YoY
  • Fixed Income Markets revenue of $5.4B, down 4% YoY, driven by lower revenue in Commodities, Rates, Credit and Public Finance, largely offset by higher revenue in Currencies & Emerging Markets
  • Equity Markets revenue of $5.0B, up 49% YoY, driven by strong performance across products, particularly in Prime and Derivatives
• Securities Services revenue of $1.6B, up 14% YoY, predominantly driven by fee growth on higher market levels and client activity, as well as higher deposit balances and higher deposit margin

Banking and Payment revenue

• IB revenue of $3.1B, up 15% YoY, largely driven by higher advisory fees, but missing estimates of $3.27B
• Payments revenue of $5.6B, up 14% YoY, driven by higher deposit balances, higher deposit margin and fee growth
• Lending revenue of $2.2B, up 20% YoY, largely driven by lower losses on hedges of the retained lending portfolio and higher loan balances

Expense of $10.8B, up 11% YoY, predominantly driven by higher brokerage expense and higher compensation expense, including higher revenue-related compensation

Credit costs of $663mm, predominantly driven by net lending activity and changes in the credit quality of certain exposures

• Net reserve build of $452mm and NCOs of $211mm

The FICC miss was the most notable and follows as trading desks face fallout from rising interest rates, although it isn't clear why that would have adversely impacted JPM's trading activity. 

Yet while FICC was a disappointment, the bank's equity traders notched their best third quarter on record, with a 49% jump from a year earlier to $4.95 billion. That came in ahead of expectations and marked the latest in a series of bumper quarters for that business, and was driven by the volatility of the AI bubble. 

JPMorgan’s NII for the third quarter came in at $27 billion, above estimates. Expenses for the quarter were $27.3 billion, more than expected, and the bank lifted its full-year adjusted expense guidance to about $108.6 billion, above the $107.5 billion executives expected in July.  

Commenting on the results, CEO Jamie Dimon said that "each line of business performed well" adding that growth continued to be robust in card, even as the bank "reduced share repurchases this quarter."

“Large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface,” Chief Executive Officer Jamie Dimon said in the statement. “These forces may be manageable, but we remain prepared for a wide range of outcomes.”

Dimon said on Bloomberg Television last week that there was “a little bit of a slowdown in September” for the investment-banking business.

While the bank's result were mediocre at best, with FICC and I-banking revenues that came on the weak side offset by stronger equity trading, it was the bank's guidance that was published in the earnings presentation, released almost an hour after earnings hit, that helped the stock recover most of its losses. 

The bank reported that it now expects to earn about $106.2 billion in net interest income this year, more than the roughly $105.5 billion it predicted in July, and that its “central case” for next year is about $107 billion in NII excluding its markets business. Both figures were about a billion ahead of analysts’ estimates.

After all that, the stock is basically unchanged, although we wouldn't be surprised if it drifts lower after the start of trading, as markets focus on the much more notable slide in actuals compared to the company's guidance.