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JPMorgan's results beat forecasts as trading revenue jumps

Published:Friday | July 15, 2016 | 7:00 AM
JPMorgan Chase CEO Jamie Dimon.

JPMorgan Chase & Company reported solid second-quarter earnings Thursday as trading revenue jumped. The bank was also able to continue cutting expenses.

In a sign that the US economy continues to improve, JPMorgan noticeably expanded its loan portfolio in the quarter as a response to increasing demand from both consumers and businesses. That's despite the economic headaches from the United Kingdom (UK) vote to leave the European Union and market turmoil earlier in the year.

The nation's largest bank by assets and revenue earned US$5.67 billion after payments to preferred shareholders. That's down slightly from a profit of US$5.78 billion in the same period a year earlier. On a per share basis, the bank earned US$1.55 a share, compared with US$1.54 a share a year earlier as the amount of shares outstanding decreased.

"JPMorgan Chase continued to perform well in all of our major businesses," JPMorgan Chase CEO Jamie Dimon said in prepared remarks.

JPMorgan's results topped Wall Street's expectations. Analysts expected earnings of US$1.42 per share, according to FactSet.

Net revenue rose to US$25.21 billion from US$24.53 billion in the same period a year earlier.

The bank's two largest divisions, consumer banking and investment banking, both reported solid growth. Within investment banking, JPMorgan's trading division did particularly well. Revenue there climbed 13 per cent from a year earlier, to US$6.5 billion. Fixed-income trading revenue soared 35 per cent, while revenue from stock trading rose two per cent.

Marianne Lake, JPMorgan's chief financial officer, said there were several reasons for the jump in trading revenue. Trading maintained momentum through the second half of June, instead of tapering off as it has done so historically, possibly as a result of the UK's vote to leave the European Union. The bank also benefited from oil prices stabilising and bond prices rising sharply this quarter.

It remains too soon to tell whether JPMorgan will move its European operations out of London to another part of Europe as a result of the vote, Lake said.

"We would like to believe that we would continue to have our European franchise headquartered in London, but it's too early to say," Lake said in a conference call with reporters.

While trading was up, JPMorgan's advisory and investment banking operations struggled in the quarter, likely as a result of the UK vote and the market turmoil earlier in the year. Investment banking revenue fell to US$1.5 billion, down 15 per cent from a year ago, as the bank took fewer companies public in the quarter.

In JPMorgan's consumer bank, net revenue gained four per cent to US$11.45 billion as deposits and loans grew. Customers used their credit cards more and kept higher balances on their cards, a signal that Americans are feeling confident enough to take on increasing amounts of debt again.

The bank also appears to be opening up lending to a larger number of customers. While the bank's charge-offs rose in the quarter, Lake said that was largely due to the bank "opening the credit box," a term used by bankers to say they are making loans to people who wouldn't have qualified before.

The bank announced this week it was offering raises to 18,000 of its employees, increasing the bank's minimum wage to a range of US$12 to US$16.50 an hour from its current minimum of US$10.15 an hour.

JPMorgan is the first of the major US banks to report quarterly results. Citigroup and Wells Fargo will report today, Friday, and next week Goldman Sachs, Morgan Stanley and Bank of America will report their results.

- AP