JP Morgan profit jumps 36pc to $5.3bn
New York, October 13, 2012
JPMorgan Chase, America's biggest bank, reported a record quarterly profit yesterday, helped by a surge in mortgage refinancing.
Chief executive Jamie Dimon said he believed the housing market "has turned a corner."
The bank made $5.3 billion from July through September, up 36 per cent from the same period a year ago. It worked out to $1.40 per share, blowing away the $1.21 predicted by analysts.
Revenue rose 6 per cent to $25.9 billion, beating expectations of $24.4 billion. Earnings were also helped because the bank set aside less money for bad loans - $1.8 billion, down 26 per cent from a year ago.
Revenue from mortgage loans shot up 29 per cent. About three-quarters of that was from people refinancing, rather than buying new homes. Low interest rates and government help encouraged homeowners to refinance.
A Federal Reserve survey earlier this week found that a stronger housing market helped economic growth in almost every part of the country. Home sales are up, prices are rising more consistently in most places, and builders are more confident.
Dimon noted that the bank was still seeing a high level of souring mortgage loans, and said he expects high default-related expenses "for a while longer." And he noted homeowners are still struggling under mortgages they can't afford, saying the bank was working to modify those loans.
The bank gave few details on the surprise $6 billion trading loss that dominated its previous earnings report. It did mention that a credit portfolio moved to the investment bank from the chief investment office, which was responsible for the bad trade, "experienced a modest loss."
The bank set aside an extra $684 million for legal expenses. Chief financial officer Doug Braunstein said the reserves were related to "a variety of issues," and not just a lawsuit filed last week by the New York attorney general over mortgage-backed securities sold by Bear Stearns. JPMorgan bought Bear Stearns as it veered toward collapse in 2008.
Dimon said he couldn't predict how much the bank would have to spend in the future.
JPMorgan's investment banking unit earned more in fees for underwriting stock offerings and debt offerings, which could signal that wary companies and investors are more willing to get back into the market.
Debit card revenue fell, which the bank blamed on new rules crimping the fees that banks charge stores whenever customers pay via debit card.
The bank's revenue was slightly lower, $25.1billion, when adjusted for a special accounting rule.
Wells Fargo & Company reported a 22 per cent increase in its third-quarter profit yesterday on a surge in mortgage lending, but fell short of analysts' revenue estimates.
Wells Fargo posted earnings per share of 88 cents, topping the analysts' consensus estimate of 87 cents. But total revenue of $21.2 billion missed the $21.47bn that analysts had expected. Net income in the quarter was a record $4.9 billion. – Reuters