JPMorgan Beats Earnings

JPMorgan Chase beat earnings expectations even after a big legal expense.

For Q2, the bank reported EPS of $US1.59.

The firm had a legal expense of 13 cents per share. Even excluding the legal expense, it still beat earnings expectations.

The largest U.S. bank was expected to report adjusted EPS of $US1.31 for the second quarter, according to Bloomberg.

Revenue came in at $US25.3 billion, which also beat analyst estimates.

Revenue for Q2 was expected to come in at $US23.89 billion, Bloomberg data shows.

As expected, the bank’s trading revenue for Q2 was down year-over-year.

“Markets & Investor Services revenue was $US5.9 billion, down 12% from the prior year. Fixed Income Markets revenue of $US3.5 billion was down 15% from the prior year on historically low levels of volatility and lower client activity across products. Equity Markets revenue of $US1.2 billion was down 10% compared with the prior year, primarily on lower derivatives revenue. Securities Services revenue was $US1.1 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 $US125 million driven by gains, net of hedges, related to funding valuation adjustments/DVA, compared with a gain of $US274 million in the prior year which was primarily driven by DVA,” the earnings statement said.

Back in May, the bank warned that it’s market revenue for the second quarter could be down 20% because of the “challenging environment.”

Meanwhile, the bank’s mortgage business completely tanked during the second quarter.

“Mortgage Production pretax income was $US63 million, a decrease of $US519 million from the prior year, reflecting lower revenue, partially offset by lower expense and lower repurchase losses. Mortgage production-related revenue, excluding repurchase losses, was $US339 million, a decrease of $US947 million from the prior year, primarily on lower volumes. Production expense2 was $US413 million, a decrease of $US307 million from the prior year, predominantly due to lower headcount-related expense. Repurchase losses for the current quarter reflected a benefit of $US137 million, compared with a benefit of $US16 million in the prior year,” the release states.

The bank noted that mortgage application volumes were down 54% from Q2 in 2013. They were up 15% from the first quarter.

Also, JPMorgan CEO Jamie Dimon disclosed earlier this month that he has curable throat cancer.

Shares are up about 1% in the pre-market.

Here’s an excerpt from the release:


JPMorgan Chase & Co. (JPM):

  • The Firm had strong underlying performance2, notwithstanding industry-wide headwinds in Markets and Mortgage

    • Consumer & Community Banking: average Consumer & Business Banking deposits up 9%; credit card sales volume1up 12%; record client investment assets up 19%; record Business Banking loan originations up 46%
    • Corporate & Investment Bank: maintained #1 ranking for Global Investment Banking fees with 8.2% wallet share YTD; assets under custody up 14%
    • Commercial Banking: period-end loan balances up 9%, driven by 14% growth in Commercial Real Estate; gross investment banking revenue with Commercial Banking clients up 25%
    • Asset Management: twenty-first consecutive quarter of positive net long-term client flows; record client assets up 15%; record loan balances up 17%
  • Second-quarter results3included as a significant item $US500 million after-tax Firmwide legal expense ($0.13 per share after-tax decrease in earnings; $US669 million pretax expense)
  • Approximately $US3 billion returned to shareholders in 2Q14

    • Repurchased $US1.5 billion of common equity4
    • Increased common stock dividend to $US0.40 per share
  • Fortress balance sheet maintained

    • Common Equity Tier 11,5of $US161 billion, or ratio of 9.8%
    • Strong liquidity — compliant with LCR6— HQLA7of $US576 billion
    • Firm Supplementary Leverage Ratio (“SLR”)1,8of 5.4%
  • Core loans1up 8% compared with the prior year
  • JPMorgan Chase supported consumers, businesses and our communities

    • $1.0 trillion of credit and capital raised for the first six months of 20141

      • $93 billion of credit for consumers
      • $10 billion of credit for U.S. small businesses
      • $296 billion of credit for corporations
      • $611 billion of capital raised for clients
      • $33 billion of credit and capital raised for nonprofit and government entities, including states, municipalities, hospitals and universities
    • Hired over 7,200 U.S. veterans and service members since 2011
1 For notes on non-GAAP financial measures, including managed basis reporting, see page 12.For additional notes on financial measures, see page 13.

2 Percentage comparisons noted in the bullet points are calculated versus the prior-year second quarter.

3 Second quarter results also included other, less significant open (positive and negative) non-core items.

4 The repurchase amount is presented on a trade-date basis.

5 Represents the estimated impact of Basel III Advanced fully phased-in capital rules the Firm will be subject to as of January 1, 2019.

6 Liquidity Coverage Ratio (“LCR”) is based on the current understanding of the proposed rules.

7 HQLA (“High Quality Liquid Assets”) is the estimated amount of assets that will qualify for inclusion in the Basel III Liquidity Coverage Ratio.

8 Reflects the U.S. Final Leverage Ratio NPR issued on April 8, 2014.

JPMorgan Chase & Co. (JPM) today reported net income for the second quarter of 2014 of $US6.0 billion, compared with net income of $US6.5 billion in the second quarter of 2013. Earnings per share were $US1.46, compared with $US1.60 in the second quarter of 2013. Revenue1 for the quarter was $US25.3 billion, down 2% compared with the prior year. The Firm’s return on tangible common equity1 for the second quarter of 2014 was 14%, compared with 17% in the prior year. Core loans increased by 8% compared with the prior year. The Firm repurchased $US1.5 billion of common equity in the second quarter.

Jamie Dimon, Chairman and Chief Executive Officer, commented on the financial results: “Despite continued industry-wide headwinds in Markets and Mortgage, the firm has continued to deliver strong underlying performance. Consumer & Community Banking deposit growth and card sales volume both outpaced the industry2, and we had record loan originations in Business Banking. The Corporate & Investment Bank saw strong performance in fees with #1 position in Global IB fees YTD, global debt and equity, global syndicated loans and global long-term debt. Commercial Banking clients generated record investment banking revenues in the first half of the year. Asset Management had excellent performance across all measures.”

Dimon continued: “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.

“Consumers, middle market companies and corporations are in increasingly good financial shape and the labour market is showing steady improvement. JPMorgan Chase provided credit and raised capital of over $US1.0 trillion for our clients during the first half of 2014, which included $US10 billion for U.S. small businesses.”

Dimon concluded: “This quarter marked the 10-year anniversary of JPMorgan Chase and Bank One coming together – the company overcame significant challenges and achieved extraordinary things during this time. Each of our businesses is among the best in the world, with increased market share, strong earnings performance and power, and an unwavering focus on serving our clients, communities and shareholders with distinction and dedication. We continue our progress on adapting to the new global financial architecture and on our control agenda. My pride in the company is greater than ever.”

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