JPMorgan Profit Falls 19% on Trading, Mortgage Declines

Mortgage & Real Estate

JPMorgan Chase Co., the biggest U.S. bank, said first-quarter profit fell 19% on lower revenue from fixed-income trading and mortgages, themes that may be repeated across Wall Street next week. The shares declined 2.9%.

Net income dropped to $5.27 billion, or $1.28 a share, from $6.53 billion, or $1.59, a year earlier, according to a statement today from New York-based JPMorgan. Ten analysts surveyed by Bloomberg estimated $1.46 a share on average.

JPMorgan, the first of the top U.S. banks to post results for the period, said profit fell in every major division, amid a 42% drop in mortgage revenue and a 21% slide in fixed-income trading. Chief Executive Officer Jamie Dimon warned investors in February that trading had fallen 15% for the first two months of 2014, a decline analysts including David Konrad of Macquarie Group Ltd. blamed on a reduction in the Federal Reserve’s bond purchases.

“It’s been a tough quarter for the industry,” said Pri de Silva, senior banking analyst at CreditSights Inc. in New York. “I’m not overly worried about JPMorgan unless I see something else going on apart from what we already know is lower fixed- income trading and mortgage results.”

JPMorgan fell to $55.75 in New York trading at 7:41 a.m. from $57.40 yesterday.

Konrad said in an April 4 research note that banks will have a “challenging quarter” as higher interest rates reduce loan refinancings.

Total revenue dropped 7.7% to $23.9 billion, as noninterest expenses declined 5.1% to $14.6 billion.

JPMorgan’s investment-banking head, Daniel Pinto, said this week he was overhauling the division’s reporting lines after his former co-head, Mike Cavanagh, left to join Carlyle Group LP. Pinto named Carlos Hernandez co-head of global banking with Jeff Urwin, John Horner head of investor services and Joyce Chang global head of research.

Earnings at Pinto’s corporate and investment bank dropped 24% to $1.98 billion, as revenue declined 15% from a year earlier to $8.61 billion. Fixed-income trading revenue fell to $3.8 billion on “weaker performance across most products and lower levels of client activity,” the bank said.

The 21% drop in fixed-income trading revenue surpassed estimates of a 15% decline from Moshe Orenbuch, an analyst at Credit Suisse Group AG, and 17 percent from Wells Fargo Co.’s Matt Burnell.

Net income from consumer and community banking, run by Gordon Smith, fell 25% to $1.94 billion as provisions for credit losses surged 49% to $816 million. Revenue was $10.5 billion, down 10% from a year earlier.

Mortgage revenue dropped to $1.57 billion in the quarter, from $2.72 billion a year earlier. Home-loan originations were $17 billion, down 68% from the prior year as higher interest rates curtailed refinancings.

JPMorgan said profit in asset management, run by Mary Erdoes, declined 9% to $441 million, as costs rose 11% to $2.1 billion on “headcount-related expenses.” Assets under management climbed 11% to $1.6 trillion amid greater inflows and rising equity markets. Commercial banking, a division run by Doug Petno, posted a 3% profit decline to $578 million.

Leave a Reply