JPMorgan Chase & Co.’s traders and investment bankers emerged from a messy third quarter with a few surprise wins.

Fixed-income trading revenue jumped 25% and investment-banking fees posted an unexpected increase. That led the corporate and investment bank division to its best third quarter in three years.

JPMorgan seized on some late-quarter volatility in fixed-income markets, pushing trading revenue higher than what Chief Executive Officer Jamie Dimon had forecast just a few weeks earlier. Increased flows in rates and commodities drove the gains in debt trading, Chief Financial Officer Jenn Piepszak said on a conference call with analysts.

And even as global trade tensions weighed on cross-border dealmaking and companies from WeWork to Endeavor Group Holdings Inc. shelved plans for initial public offerings, JPMorgan managed a 9% increase in banking fees on the strength of debt and equity underwriting.

“JPMorgan stacks up very well relative to its competitors in the U.S, particularly in the capital-markets area,” Fred Cannon, an analyst at KBW, said in an interview on Bloomberg Television.

Shares of the company rose 1.3 per cent to US$117.92 at 9:34 a.m. in New York. They’ve jumped 21 per cent this year. Goldman Sachs Group Inc. fell as much as 3.2 per cent after the bank reported a US$267 million markdown on public equity wagers and investment-banking revenue that missed analysts’ estimates.

Dimon tempered expectations for trading revenue last month, saying he wasn’t “jumping for joy” at the prospect of a 10 per cent jump in the metric because the gain is compared with a weak third quarter in 2018. The actual increase was 14 per cent.

The strength in fixed-income trading was offset by a surprise five per cent decline in equity-trading revenue, to US$1.5 billion, which the bank blamed on derivatives. Analysts had been expecting a five per cent increase.

JPMorgan had been expected to benefit from a pullback by Deutsche Bank AG in equities. The bank has been investing in electronic technology and sharpening its focus on trade execution, trying to unseat Morgan Stanley as Wall Street’s top stock-trading shop.

Repo rates surged late last month, providing an opportunity for banks to profit from the swings that left hedge funds and broker-dealers scrambling for cash.

Trading Challenges

Wall Street trading desks have been struggling to revamp their businesses as a shift to passive investing, struggles among hedge funds and moves to cheaper electronic trading have made banks’ securities units less profitable. The five biggest U.S. banks saw a collective $5 billion drop in trading revenue in the first half of the year.

JPMorgan’s third-quarter investment-banking fees rose 8.7 per cent to US$1.98 billion thanks to stronger-than-expected results from the bank’s capital-markets team. Fees from helping companies raise money through bond deals and stock offerings increased 18 per cent to $1.47 billion. Fees from advising on mergers and acquisitions slumped 13 per cent to US$506 million, worse than expectations for a seven per cent drop.

The bank’s book of what it considers core loans contracted for only the second time since the Federal Reserve started increasing interest rates in 2015. Average core loans fell to $900.6 billion from US$905.8 billion in the previous quarter, driven by decreased lending in the consumer and investment-banking divisions. Loans to medium-sized companies and to clients of its asset and wealth-management group increased.

Other key results:

• Net income rose 8 per cent to $9.08 billion, or US$2.68 a share, from US$8.38 billion, or US$2.34, a year earlier, the company said Tuesday in a statement. That beat the US$2.46 average estimate of 20 analysts surveyed by Bloomberg.
• The firm’s consumer banking unit posted a seven per cent increase in revenue as investments to open up branches in new states started to yield returns.
• Net charge-offs at the bank surged 33 per cent to US$1.37 billion from US$1.03 billion last year.
• The bank lowered its guidance for this year’s non-interest expense to US$65.5 billion from an earlier estimate of less than US$66 billion.

--With assistance from Gwen Everett.