JPMorgan profit beats forecast as capital markets recover

The biggest US bank by assets reported a better-than-expected quarterly profit

JPMorgan Chase & Co, the biggest US bank by assets, reported a better-than-expected quarterly profit, helped by a tight controls on expenses, loan growth and a rebound in capital markets.

The bank’s net income slipped to $6.20 billion (Dh22.8 billion) in the second quarter ended June 30, from $6.29 billion a year earlier, as it set aside more money to meet future loan losses. However, earnings per share rose to $1.55 from $1.54, handsomely beating the average analysts’ estimate of $1.43 per share, according to Thomson Reuters I/B/E/S.

JPMorgan is the first US bank to announce results for the quarter, as well as the first to report since Britain voted on June 23 to leave the European Union.

The vote threw into doubt the likelihood of a US interest rate hike anytime soon, meaning JPMorgan said after the Brexit vote that it was considering changes to its structure in Europe that could result in moving some of its 16,000 UK-based employees.

The bank’s earnings announcement yesterday did not provide any details of the bank’s post-Brexit strategy. that lending margins will remain under pressure. It also raised questions about how much money and time US banks will have to spend to shift some of their London operations serving European customers.

Volatile business

JPMorgan’s total revenue rose 2.8 per cent to $25.21 billion, while revenue from fixed-income trading — the bank’s most volatile business — jumped 35 per cent to $3.96 billion.

Net interest income increased 6 per cent to $11.7 billion, but low borrowing costs coupled with a strong labour market helped mortgage banking revenue rise 4.8 per cent.

JPMorgan’s shares were up 1.88 per cent at $64.35 in premarket trading. Other bank shares were also higher. The US Federal Reserve last raised rates in December, by 0.25 percentage points, after keeping them near zero for almost a decade. At the start of the year, it was widely expected that there would be two rate hikes this year.

Now, Wall Street’s top banks are almost evenly split on whether the Fed will raise rates at all this year, according to a Reuters poll. JPMorgan’s total non-interest expenses fell 5.9 per cent to $13.64 billion in the quarter, while total provisions for bad loans jumped 50 per cent to $1.4 billion. While JPMorgan is a major lender to energy companies, its total loans to the industry are relatively small in comparison to the bank’s assets of more than $2.4 trillion.