Profit up 18% at JP Morgan as US earnings season kicks off

JP Morgan Chase kicked off the Wall Street earnings season with strong second-quarter results that will provide reassurance to investors who have sold off shares in the big US banks over the past six months.

The New York-based bank, which has $2.6 trillion in assets on its balance sheet, reported revenue of $27.7 billion and earnings per share of $2.29, up 6 per cent and 26 per cent from a year ago, respectively. The consensus estimate among analysts had been for revenue of $27.6 billion and EPS of $2.22.

Net profits increased 18 per cent to $8.3 billion. Net interest income was up 9 per cent, “driven by the impact of higher rates and loan growth,” JPMorgan said.

Jamie Dimon, chairman and chief executive, said: "We see good economic growth, particularly in the US, where consumer and business sentiment is high ... Capital markets were open and active, leading to strong fee and markets revenue performance."

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The investment banking and markets businesses were particularly strong. Investment banking fees, at $2.2 billion, were up 17 per cent. Markets revenue was up 16 per cent, excluding certain items, while fixed income markets trading revenue climbed 12 per cent on the same basis. Equities trading revenue jumped 24 per cent.

Revenues from mortgages and credit cards were both down significantly, however.

Devon Ryan, banking analyst at JMP securities, said that “the traditional banking and credit card businesses were in line with expectations, but banking fees and trading were much better than what [WALL ST]was looking for — fixed income was resilient and JPMorgan seems to be taking market share in equities.”

The results were particularly striking, he said, given that the company had indicated in late May that trading revenues would be up only in the single-digits.

The earnings sent JPMorgan shares rising 1 per cent in pre-market trade in New York. Its shares had fallen by a tenth since February. Shares in Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley have all seen similar or worse declines over the same period, despite the positive impact on bank earnings of the Trump administration’s tax cuts and higher interest rate.

The pressure on shares of the US universal banks has been attributed to a flattening yield curve, and fears that the economic cycle has peaked and is poised to turn down. - Copyright The Financial Times Limited 2018