JPMorgan Chase & Co. posted a 67 percent increase in first-quarter earnings, topping Wall Street expectations, as it set aside less money to cover bad loans.
The news was not all positive for the nation’s second-largest bank. It said it was still suffering from high mortgage losses. The bank’s book of consumer loans shrank by 10 percent in the quarter, and loans to corporate customers did not rise enough to offset that.
But the results were good enough to lift JPMorgan shares 1.2 percent in premarket trading and also boosted other bank stocks. JPMorgan is the first of the big banks to post quarterly results, and its earnings often give investors a hint of what to expect from other financial companies.
"These were good numbers. They beat estimates, but not massively. I think the financial sector generally is holding up but is not performing quite as well as we would like to see," said Peter Dixon, an economist at Commerzbank in London.
Shares of Bank of America Corp., due to report earnings on Friday, rose 1.1 percent to $13.62 in premarket trading. Shares of Goldman Sachs Group Inc., which reports next Tuesday, rose 1 percent to $162.
JPMorgan earned $5.56 billion, or $1.28 a share, up from $3.33 billion, or 74 cents a share, in the same quarter last year.
Wall Street analysts, on average, had expected $1.16 per share, according to Thomson Reuters I/B/E/S.
The bank set aside $1.17 billion to cover bad loans, down from $7.01 billion a year earlier.
In March JPMorgan received a green light from the Federal Reserve to boost its dividend, after passing a second round of stress testing. The bank’s declining loan losses, which allow it to set aside less money to cover bad loans, were a key factor behind that move.
JPMorgan will begin paying a quarterly dividend of 25 cents per share at the end of April. It has also authorized a $15 billion share repurchase.
Chief Executive Jamie Dimon is often credited with skillfully piloting his bank through the financial crisis, but many investors are now looking for signs of revenue growth.
In recent quarters, the bank has boosted profit mainly by setting aside less money to cover credit losses, rather than by generating more money from new loans.
Pre-provision profit, a measure of how much the bank earns before setting aside money for credit losses, fell 20 percent to $9.23 billion. Loans on the bank’s books fell 4 percent to $686 billion, indicating demand for loans is tepid compared with how quickly existing loans are being repaid.
"The key is loan growth," said Adrian Cronje, chief investment officer at wealth management firm Balentine in Atlanta. "That’s what will ultimately turn this recovery into a durable expansion, but it seems like that’s not yet happening."
JPMorgan’s investment banking profit fell to $2.37 billion from $2.47 billion a year earlier. Merger advisory and debt underwriting revenue jumped, while trading revenue fell, as did stock underwriting.
One continuing millstone for JPMorgan is its residential mortgage book, where it took a $1.1 billion charge before taxes to account for the higher costs of collecting payments on mortgages, and a $650 million charge before taxes for foreclosure-related matters. Those costs will not be recurring, Chief Financial Officer Doug Braunstein said on a conference call with reporters.
But in a statement, Dimon said the bank is suffering from "extraordinarily high losses" from mortgage-related issues.
"Unfortunately, these losses will continue for a while," Dimon said.
