JPMorgan smashed it out of the park thanks to growth in one huge business

JPMorgan Chase CEO Jamie Dimon.Kimberly White/Getty Images

JPMorgan kicked off earnings season for banks on Friday and crushed it.

The firm beat analyst expectations across investment banking and trading — and had a historically strong quarter in one business in particular.

In fixed-income trading, JPMorgan reported revenue of $4.33 billion for the quarter — up 45% from the same quarter a year ago — smashing analyst expectations for $3.17 billion. The beat was driven by higher revenue in rates, credit, and securitized products, the firm said in a statement.

Overall, JPMorgan reported earnings of $24.67 billion, better than analyst expectations for $24.25 billion. Earnings per share of $1.58 also beat an expected $1.39.

Speaking on a conference call to discuss the results, CFO Marianne Lake said the rates business was the bank’s standout performer, with more activity taking place after Britain’s vote to leave the European Union. She added that rates performance remained consistently strong throughout the quarter, in part because of central-bank activity.

Lake also said credit was “a comeback story” following a challenging period there.

JPMorgan’s banking and trading revenue breakdown.JPMorgan

That’s a huge quarter for the division. In fact, it’s the biggest for JPMorgan since the first quarter of 2013, when the firm reported fixed-income revenue of $4.8 billion.

And it comes in a period that is usually one of the quietest of the year thanks to a summer trading lull. First quarters are usually the strongest for trading businesses.

This could be good news for Wall Street. If you’ve been paying attention to the fixed income, currencies, and commodities, or FICC, world, you know that business has had a terrible run in recent years. FICC revenue fell 9% across major banks in 2015.

Many firms have been cutting FICC headcount, including Deutsche Bank, Credit Suisse, Goldman Sachs, and Morgan Stanley, which cut 25% of the division last year.

But as most firms began to turn away from the business, JPMorgan said it would stick to its guns.

“We’re investing in it,” CEO Jamie Dimon said at the bank’s investor day in February. “We’re investing in it more on the technology side.”

Lake, the CFO, later echoed that sentiment, saying at the time that JPMorgan’s fixed-income markets business continued to perform as its rivals retrenched.

That seemed to be paying off in the second quarter this year, when JPMorgan reported solid revenue of $3.96 billion for the business. There was some question at the time over whether the so-called Brexit had had a significant impact on banks’ FICC trading revenue during that quarter.

Coalition

When the UK decided in June to leave the European Union, JPMorgan posted record foreign-exchange trading volumes, at one point processing 1,000 trading tickets a second, Dimon said. That would have had an impact on the firm’s foreign-exchange revenue, but JPMorgan was up in numerous divisions, including rates, credit, emerging markets, and securitized products.

Multiple analysts, including Deutsche Bank’s Matt O’Connor, UBS’ Brennan Hawken, and Macquarie’s Piers Brown predicted a stronger quarter in FICC, especially for JPMorgan.

But the fact that that firm had such a strong beat does raise the question of whether we’ll see any positive surprises from the other bulge-bracket banks.

Citigroup and Wells Fargo reported third-quarter earnings after JPMorgan on Friday, while Bank of America Merrill Lynch, Goldman Sachs, and Morgan Stanley report next week.