JPMorgan's Profits Decline From Last Year, But Less Than Expected

Despite declines in revenues from mortgages and trading, the largest bank in the country beat out analysts’ profit expectations.

Jamie Dimon, chairman and CEO of JPMorgan Chase.

Kevin Lamarque / Reuters / Reuters

JPMorgan Chase, the country's biggest bank by assets, saw its profits and revenue for the second quarter fall from last year, but still handedly beat analysts expectations, as the nation's biggest banks continued a trend of slightly less deterioration in their profitability as many anticipated. The bank earned $1.46 a share in profits, more than the $1.31 analysts polled by Bloomberg predicted, but still down from $1.60 a year ago. Revenues were roughly stable over the year, with $24.5 billion, down 3% from $25.2 billion last year.

Those figures were weighed down by another hefty legal expense of 13 cents a share, or $669 million before taxes. JPMorgan paid over $20 billion in 2013 in settlements, fines, and compensation for investors to end investigations and lawsuits related to its banking with Bernie Madoff, sales of mortgage-backed securities before the financial crisis, and the 2012 derivatives loss known as the London Whale.

Like two of its biggest competitors in trading and markets, Goldman Sachs and Citigroup, JPMorgan forecasted a disappointing quarter for its fixed income and equities trading business. In a May regulatory filing, the bank said that its revenue from those two segments would be down about 20% from the second quarter of last year, when they brought in $5.4 billion, to about $4.3 billion.

Instead, the bank's fall off in trading revenues was less dire than projected. The bank's fixed income unit brought in $3.5 billion, while its equities unit brought in $1.2 billion, for a combined revenue of $4.7 billion, a total decrease of 13% from the year before.

"Despite continued industry-wide headwinds in Markets and Mortgage, the firm has continued to deliver strong underlying performance," JPMorgan's chairman and CEO Jamie Dimon said in a statement.

The bank attributed the decline in trading revenue to "historically low levels of volatility and lower client activity across products" in fixed income and lower derivatives revenues in equities. JPMorgan's trading results continued a trend started yesterday by Citigroup, one of JPMorgan's rivals among universal banks, which also reported a better trading result than executives had publicly predicted in May, which lifted big bank shares Monday, including JPMorgan.

The bank's production of new mortgages continued to fall precipitously from elevated levels a year ago, with originations of $16.8 billion, a 66% decline from last year, but only a 1% drop from the first quarter of this year. The bank's revenue from mortgages dropped 37% to $2.3 billion, while its profit fell 38.5% to $709 million.

"Toward the end of the second quarter, we saw encouraging signs across our businesses," Dimon said, echoing statements Citi executives made Monday, "while it is too early to assume that this momentum will continue, we have confidence in the long-term growth of the economy."

The bank also said its total headcount had fallen over the year by 8,871 to 245,192, a decrease of 8,871, compared with the prior year, a 3.5% drop. The bank is amidst an effort to cut expenses and saw its noninterest expenses drop 3% to $15.4 billion.

The bank's earnings release also included a look back by Dimon on the history of the firm he helped create with the merger of JPMorgan Chase and Bank One in 2004. "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," Dimon said.

Dimon, who has led the bank as its chairman and CEO since 2006, was diagnosed with throat cancer earlier this month. In a letter to shareholders and employees, Dimon said his prognosis was "excellent" and that the cancer was "caught quickly, and my condition is curable."

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