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JPMorgan proves wall street profits don't depend on traders

Jul 14 2017 14:41
Hugh Son, Bloomberg

New York - Jamie Dimon proved JPMorgan Chase & Co doesn’t just rely on traders for profits.

The bank earned $26.5 billion over the past 12 months, the most ever by any major US bank.

While trading results reported on Friday were worse than analysts expected, second-quarter net income set a record and the company said it will increase loans to companies and consumers this year at a rate that’s double what analysts predicted.

The biggest US bank kicked off earnings season for the industry, offering insight into how Wall Street trading and advisory and Main Street lending businesses performed.

Following a first quarter in which most firms posted better-than-expected trading results, executives including JPMorgan CFO Marianne Lake tempered expectations, saying trading revenue was 15% lower in April and May from a year earlier because of muted volatility.

JPMorgan overcame that with record revenue from its commercial bank and record profit at its wealth-management division. The lender also benefited from interest higher rates as the Federal Reserve raised its benchmark lending rate for the third time in six months in June.

Markets revenue fell 14%. The trading decline raises questions about whether the rebound in bond trading over the past year is at risk of stalling.

In late May, Lake said that markets were subdued because of uncertainty over the path of interest rates amid questions about US policy and economic growth. Banks needed idiosyncratic events of the kind that helped boost trading in 2016 - the US election and UK referendum, for example - to change that dynamic, she said.

Shares of the company fell 1% to $92.20 at 13:58. They’ve gained 7.9% this year through Thursday.

Record results

JPMorgan’s total profit in the past year surpasses the $25bn. Citigroup earned in the 12 months ended in June 2006, according to data compiled by Bloomberg.

Still, JPMorgan has further to go to reach its own targets for costs and return on equity. The lender is seeking to ramp up the latter measure by paying out more capital to shareholders. Last month, it won approval on its plan to increase its quarterly dividend 12% and ramp up share repurchases to $19.4bn over the next 12 months - roughly 90% more than in the prior year.

Net income rose 13% to $7.03bn from $6.2bn, or $1.55, a year earlier, the New York-based company said on Friday in a statement. That beat the $1.58 estimate of 23 analysts surveyed by Bloomberg, helped by a $406m gain from a legal settlement.

Companywide revenue rose 5% to $26.4bn, which exceeded analysts’ average estimate of $25.4bn. Higher interest rates and loan growth fueled an 8% increase in interest income to $12.5bn. The firm’s provision for credit losses shrank to $1.2bn from $1.4bn a year earlier.

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