Profit falls 1.4% at JPMorgan Chase in second quarter

JPMorgan Chase, the biggest US bank by assets, said second-quarter profit fell 1.4 percent, beating analysts' estimates as fixed-income trading revenue and loan growth jumped.

Net income dropped to $6.2 billion, or $1.55 a share, from $6.29 billion, or $1.54, a year earlier, the company said Thursday in a statement.

Excluding an accounting adjustment and a legal benefit, earnings were $1.46 a share, three US cents higher than analysts’ average estimate.

Revenue climbed 2.8 per cent to $25.2 billion, beating the $24.5 billion average estimate of seven analysts.

The company said average core loans increased 16 per cent from a year earlier. The revenue figure included $3.96 billion from fixed-income trading, a 35 per cent increase, beating the $3.57 billion estimate of analysts. The firm cited strength in rates, currencies, emerging markets, credit and securitised products.

Equity trading rose 1.5 per cent to $1.6 billion.

JPMorgan kicks off earnings season for US banks, and may offer insight into the industry’s prospects for trading and advisory operations after the UK’s surprise vote last month to leave the European Union.

While JPMorgan executives have said trading rebounded in April and May, that was before the referendum roiled markets and pushed out expectations for additional US interest-rate increases to at least next year.

The delay would extend a post-financial-crisis era of low rates that’s forced banks to rely on expense cuts to cope with stagnant revenue.

“The success can last for a quarter or a two, but I think it’s still going to be a very difficult year,” Charles Peabody, an analyst at Portales Partners, said. “I’m still expecting earnings to be down year over year.”

Bank stocks plummeted after the vote and yields on 10-year Treasury notes fell to a record, draining financial firms of interest income. JPMorgan, which lost about 10 per cent of its values in the two days after the June 23rd Brexit referendum, has since recovered most of that decline.

"We saw strong underlying performance with record consumer deposits, credit-card sales volume, merchant processing volume and broad core loan growth" fuelled by mortgages and commercial property, chief executive Jamie Dimon said.

Non-interest expenses fell 6 percent to $13.6 billion on cost cutting and lower legal bills, the bank said. That compared with analysts’ $14 billion estimate.

Earnings at the corporate and investment bank, run by Daniel Pinto, climbed 6.5 per cent to $2.49 billion as revenue rose 5.1 per cent from a year earlier. Markets revenue, which includes bond and stock trading, rose 23 per cent.

Investment banking revenue fell 15 per cent to $1.5 billion on lower equity-underwriting fees. The figure was in line with analysts’ $1.49 billion estimate.

Profit from consumer and community banking, run by Gordon Smith, rose 4.9 per cent to $2.66 billion on strength in mortgages. Revenue was $11.5 billion, up 4 per cent from a year earlier.

Net income in asset management, run by Mary Erdoes, increased 16 per cent to $521 million on lower legal expenses. Revenue fell 7.4 per cent to $2.94 billion on weaker markets and lower performance fees.

Commercial banking, the unit run by Doug Petno, posted a 33 per cent profit increase to $696 million on higher loan balances.

Citigroup and Wells Fargo are scheduled to report results Friday, while Bank of America, Goldman Sachs and Morgan Stanley are due next week. – Bloomberg