J.P. Morgan Posts Stronger-Than-Expected Results on Trading Surge
J.P. Morgan Chase & Co. posted stronger-than-expected quarterly earnings and a surprise increase in revenue, helped by a surge in its trading business and lower expenses.
Shares rose 1.7% premarket.
The largest U.S. bank by assets reported a profit of $6.2 billion, or $1.55 a share. That compares with a profit of $6.29 billion, or $1.54 a share, in the same period of 2015. Analysts polled by Thomson Reuters had expected earnings of $1.43 a share.
Advertisement
Revenue rose 2.4% to $24.38 billion. On an adjusted basis, revenue was $25.21 billion, greater than the $24.16 billion analysts had expected.
J.P. Morgan, run by Chairman and Chief Executive James Dimon, kicks off second-quarter earnings season for large U.S. banks, offering investors a snapshot of a quarter that analysts expect will be characterized by Brexit’s surprise on the back end. Plummeting bond yields in the wake of that promise to add to pressure on bank profits in coming quarters.
J.P. Morgan’s trading revenue increased 23% to $5.56 billion from $4.51 billion in the second quarter of 2015. Daniel Pinto, head of J.P. Morgan’s corporate and investment bank, said in mid-June that trading was expected to rise by more than 10% in the second quarter.
J.P. Morgan’s loan book was 11% higher at mid-2016 than a year earlier at $460.09 billion. Mr. Dimon said the growth was due in part to strong mortgage and commercial-real-estate results. Mortgage-banking revenue rose 4.8% in to $1.92 billion while loans jumped 17%. Though mortgage-production revenue jumped 12% to $261 million, mortgage fees and related income dropped 12% to $689 million. The bank repositioned its mortgage business in the last year, shrinking it and focusing more on high-quality borrowers. That comes as as the fresh drop in interest rates has driven some of late to seek refinancings.
Costs decreased 5.9% to $13.64 billion from $14.5 billion a year earlier, an effort the bank continues to drill down on, though Ms. Lake warned in mid-June that they were expected to be flat.
The bank’s provision for credit losses ballooned 50% to $1.4 billion due to reserve increases and higher net charge-offs.
Return on equity, a measure of J.P. Morgan’s profitability, was 10% in the second quarter compared with 11% in the second quarter a year ago. J.P. Morgan has continued to face more forceful questions from analysts and shareholders over the past year over whether it might be better for investors if the global bank broke itself up into smaller, more manageable units. J.P. Morgan has forcefully rejected the idea that a break-up would create value, arguing its size and scale bring benefits.
So far in 2016, J.P. Morgan’s shares are down 4.4% compared with a 9.5% decrease in the KBW Nasdaq Bank index. Big-bank stocks have been hit hard this year, first by fears around China’s economic growth and the oil-price slide and then by Brexit. Still, large U.S. banks have fared much better than their European counterparts.
Write to Emily Glazer at
emily.glazer@wsj.com and Peter Rudegeair at
Peter.Rudegeair@wsj.com