Daily News: July 15, 2014

JPMorgan Beats Estimates Despite Earnings Drop


JPMorgan Chase reported Q2/14 net income of $6.0 billion, compared with net income of $6.5 billion in the second quarter of 2013. Earnings per share were $1.46, compared with $1.60 in the second quarter of 2013.
Analysts, on average, had expected EPS of $1.29, according to Thomson Reuters.

The bank said revenue for the quarter was $25.3 billion, down 2% compared with the prior year. Core loans increased by 8% compared with the prior year.

Jamie Dimon, chairman and chief executive officer, noted: “Toward the end of the second quarter, we saw encouraging signs across our businesses including an uptick in wholesale utilization, strengthening pipelines in our commercial and business banking segments, and some improvements in markets activity. While it is too early to assume that this momentum will continue, we have confidence in the long-term growth of the economy.”

Highlights from the Corporate & Investment Bank follow:

Net income was $2.0 billion, down 31% compared with $2.8 billion in the prior year. These results primarily reflected lower revenue, as well as higher noninterest expense. Net revenue was $9.0 billion compared with $9.9 billion in the prior year. Excluding the impact of a DVA gain of $355 million in the prior year, net revenue was down 6% from $9.5 billion, and net income was down 25% from $2.6 billion.

Banking revenue was $3.1 billion, down 2% from the prior year. Investment banking fees were $1.8 billion, up 3% from the prior year. The increase was driven by higher advisory fees of $397 million, up 31% from the prior year on strong wallet share of completed transactions, as well as higher equity underwriting fees of $477 million, up 4% from the prior year. These were partially offset by lower debt underwriting fees of $899 million, down 6% from a strong prior year.

Treasury Services revenue was $1.0 billion, down 4% compared with the prior year driven by lower trade finance revenue as well as the impact of business simplification initiatives. Lending revenue was $297 million, down from $373 million in the prior year primarily due to lower net interest income.

Markets & Investor Services revenue was $5.9 billion, down 12% from the prior year. Fixed Income Markets revenue of $3.5 billion was down 15% from the prior year on historically low levels of volatility and lower client activity across products. Equity Markets revenue of $1.2 billion was down 10% compared with the prior year, primarily on lower derivatives revenue. Securities Services revenue was $1.1 billion, up 5% from the prior year primarily driven by higher net interest income on increased deposits. Credit Adjustments & Other revenue was a gain of $125 million driven by gains, net of hedges, related to funding valuation adjustments/DVA, compared with a gain of $274 million in the prior year which was primarily driven by DVA.

The provision for credit losses was a benefit of $84 million, compared with a benefit of $6 million in the prior year. The ratio of the allowance for loan losses to period-end loans retained was 1.11%, compared with 1.21% in the prior year. Excluding the impact of the consolidation of Firm-administered multi-seller conduits and trade finance loans, the ratio of the allowance for loan losses to period-end loans retained1 was 1.80%, compared with 2.35% in the prior year.
Noninterest expense was $6.1 billion, up 6% from the prior year, driven by higher non-compensation expense, partially offset by lower performance-based compensation. The current quarter noninterest expense included approximately $300 million of legal expense and approximately $300 million of costs related to business simplification. The ratio of compensation expense to total net revenue was 31%.

To link to the JPMorgan Chase news release, click here.