JPMORGAN RESULTS DEFY FORECASTS

Up­beat US bank opens re­por­ting sea­son; ‘Strong’ quar­ter sees hi­gher ear­nings.

La Presse Business (Tunisia) - - SOMMAIRE - By Ben McLan­na­han in New York,FT

JPMorgan Chase ope­ned the big US banks’ quar­ter­ly re­por­ting sea­son with bet­ter than ex­pec­ted results des­pite stub­born­ly low in­ter­est rates and a drop in deal ac­ti­vi­ty in the run-up to Brexit. The bank’s ear­nings per share of $1.55 - si­gni­fi­cant­ly ahead of es­ti­mates of $1.42 - came af­ter ana­lysts had sla­shed their forecasts for the en­tire sec­tor, fea­ring that growth in consu­mer port­fo­lios would fail to off­set chop­pi­ness in tra­ding and in­vest­ment ban­king, and a build-up of re­serves for bad loans. In the end, JPMorgan, the big­gest US bank by as­sets, said that net re­ve­nues were 2 per cent hi­gher than a year ago, at $24.38bn. Net in­come was frac­tio­nal­ly lo­wer, at $6.2bn from $6.29bn, as pro­vi­sions for cre­dit losses rose 50 per cent to $1.4bn. But ear­nings per share of $1.55, on a di­lu­ted ba­sis, were a pen­ny hi­gher than a year ago - hel­ped by a $430m re­lease of re­serves for li­ti­ga­tion. Ma­rianne Lake, chief financial of­fi­cer, des­cri­bed the quar­ter as “strong”, ci­ting year-on-year loan growth of 16 per cent and a consu­mer bu­si­ness, in par­ti­cu­lar, which was “fi­ring on all cy­lin­ders”. The bank left its gui­dance for the full year un­chan­ged, des­pite fresh mar­ket tur­moil un­lea­shed by the re­sult of the UK’s re­fe­ren­dum on EU mem­ber­ship. As the first of the big US banks to pro­duce quar­ter­ly results, JPMorgan serves as a bell­we­ther. Ana­lysts ex­pect year-on-year falls in ear­nings-per-share from four of the big five banks still to re­port, with on­ly Goldman Sachs - which took a big charge for li­ti­ga­tion a year ear­lier - ex­pec­ted to buck the trend with a rise. But Ken Us­din, ana­lyst at Jef­fe­ries, no­ted “so­lid bounces” in re­ve­nues from JPMorgan’s in­vest­ment ban­king di­vi­sion, even as clients sat on their hands ahead of the EU re­fe­ren­dum at the end of last month. Se­cond-quar­ter fees from M&A and capital rai­sing were down 10 per cent from a year ear­lier, but up 23 per cent from a ve­ry grim first quar­ter. Fees from debt tra­ding, meanw­hile, rose 35 per cent from a year ear­lier, with equi­ties up 2 per cent. Ana­lysts were en­cou­ra­ged by cre­dit qua­li­ty, too, with Ch­ris Ko­tows­ki at Op­pen­hei­mer no­ting ve­ry low net charge-offs across all seg­ments of the bank. Like most of the big len­ders, JPMorgan has be­gun to build loan-loss re­serves fol­lo­wing years of re­serve re­leases since 2010. In the se­cond quar­ter it ad­ded a net $50m, promp­ted by a down­grade of one big - un­na­med client in the oil sec­tor. JPMorgan’s net in­ter­est mar­gin - the gap bet­ween the yield on its as­sets and the cost of its funds - slip­ped by five ba­sis points to 2.25 per cent, lo­wer than ana­lysts’ forecasts of 2.29 per cent.

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