In the face of lackluster trading revenues, JPMorgan Chase & Co. (NYSE:JPM) has defied the expectation that they, like other megabanks, would hurt come earnings time. The $337 billion financial holding company is certainly not immune to the decline in trading revenues but nonetheless, JPM stock has delivered for shareholders in a major way.

Revenues and profits were up. The persistently low volatility has affected all investment banks, but considering the diversified nature of JPM’s businesses, they have been able to compensate for lower earnings contribution from a traditionally very profitable business line in other ways.

With that retail banking arm, they have more levers to pull than say, Goldman Sachs Group Inc (NYSE:GS), which has historically relied heavily upon trading as a core profit driver.

Circumstances have forced GS to rethink its model and look for a new area to accelerate earnings growth. It seems the formation of a “brain trust” is part of an effort to shift focus towards investment banking. Put simply, Goldman is looking to do more and bigger deals. And they expect the brain trust to generate ideas and execute.

Internally, it has been described as “the Innovation Lab:”

“[The innovation lab is] focused on generating compelling deal ideas for companies like Warren Buffett’s conglomerate Berkshire Hathaway Inc (BRKa.N) or Japan’s SoftBank Group Corp’s (9984.T) $93 billion investment fund, people familiar with the matter said.”

JPM Stock Performance

Looking at relative stock performance, it’s clear what the market thinks. On a pure capital gains basis, YTD JPM is up 12.5% while GS is barely up 0.3%. After a strong start at the beginning of the year, financial stocks have tracked lower. JPM has still underperformed the S&P 500 despite a stellar third quarter. The market still has its concerns.

What’s clear is that CEO, Jamie Dimon, is at the top of his game. He continues to prove that he is one of the best capital allocators in the banking industry. And it’s one of the primary reasons that I’ve stuck with JPM and over other competitors.

The third quarter showed that under his leadership, the bank continues to thrive under all conditions, however adverse.

JPM’s Third Quarter

Starting with the bad, but unsurprisingly bad, we know that the investment bank has been dragged down by trading results. Low volatility and tighter credit spreads led to fixed income markets revenue declining 27% and equity markets revenue declining 4%. That said, investment banking revenue from advisory and M&A deals raked in $1.7 billion of revenue. It marks a slight year-over-year decline but JPM managed to take the top spot in ‘Global IB fees YTD 2017.’ So, all things considered, they’re doing pretty well in this division.

Onto the good, the stellar. Commercial banking was one of the major factors in the earnings beat. The division surged to record revenues of $2.1B, up 15% year-over-year. Net interest income was up an incredible 20% year-over-year. Rate hikes were a help in boosting interest income, and that’s a trend that the Federal Reserve is standing by.

Asset management also pulled it weight this quarter, setting a net income record of $674 million, up 21% year-over-year. It’s feels like small fry next to the other divisions, but given its pace of growth, I suspect it will become an ever more important contributor to overall earnings. Record AUM of $1.9 trillion is nothing to sneeze at. The wealth management business is well-regarded and net inflows of client assets in the high single digits is very solid work.

The strength of the franchise that Dimon has built has shone through this quarter. It’s a true all-weather stock with management that’s committed to returning capital to shareholders.

As of this writing, Luce Emerson was long JPM stock.