JP Morgan posts weaker-than-expected profit as trading revenue drops

http://www.theguardian.com/business/2014/apr/11/jpmorgan-weak-quarterly-profit

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JP Morgan posted far weaker-than-expected quarterly profit as uncertainty about the US economy weighed on trading volumes and lending to consumers.

Results from the first of the major Wall Street banks to post earnings underscore how difficult the first quarter was for the financial sector. JP Morgan's bond trading revenue plunged 21%, and mortgage lending revenue fell 84% from the same quarter last year.

But most of the bank's big businesses, including credit card and commercial lending, delivered lower profits.

Overall, net income fell 19% to $5.27 bn, or $1.28 per share, from $6.53bn, or $1.59 per share, in the same quarter of 2013, the biggest US bank said on Friday.

Analysts on average had expected earnings of $1.40 per share, according to Thomson Reuters I/B/E/S. The net earnings for both the latest and prior quarters included special items.

Total net revenue fell 8.5% to $22.99bn, falling well short of the average estimate of $24.53bn.

JP Morgan's shares, which recently topped $61 to trade at their highest level in 13 years, were down 3.3% at $55.50 in premarket trading.

Chief Executive Jamie Dimon struck an upbeat note, however.

"We have growing confidence in the economy – consumers, corporations and middle market companies are in increasingly good financial shape and housing has turned the corner in most markets ... ," he said in a statement.

When asked whether the bank would take more risk to boost revenue, Dimon said the bank does not change its underwriting standards to boost revenue.

"We feel really good about the risks we're taking ... for the future of the company," Dimon said on a conference call with journalists.

Dimon has been working to improve the bank's profitability after net income dropped 16% last year due to massive legal settlements and rising costs to improve compliance with laws and regulations.

JP Morgan's revenue from fixed-income fell 21% to $3.8bn in the quarter ended March 31, while revenue from equity markets fell 3% to $1.3bn.

Some investors worry about how much of the big banks' revenue streams from fixed-income trading have been lost forever as a result of changes ordered by regulators to make the banking system safer. JP Morgan's annual costs to comply with laws and regulations and control risk have increased by about $2bn.

JP Morgan, the first big investment bank to report for the quarter, said non-interest expenses fell 5% in the latest quarter to $14.6bn.

Dimon is aiming to hold down overhead – which he defines as non-interest expenses aside from litigation – to below an average of $14.75bn per quarter, or $59bn for the year.

Mortgage banking net income fell to $114m in the quarter, a drop of $559m from the year-earlier period.

The bank's mortgage originations fell 68% to $17bn from a year earlier, and were down 27% from the fourth quarter.

US mortgage lending has been cooling as homeowners finish refinancing their loans. JP Morgan, the largest U.S. bank by assets, said total assets at the end of March stood at $2.48tn, up from $2.42tn at the end of December.