JPMorgan profit rises on stock, bond trading
JPMORGAN Chase’s profit had climbed 12 percent, beating analysts’ estimates, as firstquarter revenue from trading stocks and bonds increased for the first time since 2010, the biggest US bank said.
Net income rose to $5.91 billion (R71.4bn), or $1.45 a share, from $5.27bn, or $1.28, a year earlier, according to a statement yesterday from New Yorkbased JPMorgan.
Thirty-one analysts surveyed estimated per-share earnings of $1.41.
Excluding 13c in legal expenses and about 3c in accounting adjustments, earnings were $1.61 a share.
Trading revenue had a “very strong” start to the year as higher volatility boosted volume, Daniel Pinto, the chief executive of JPMorgan’s investment bank, said in February. Wall Street firms contended with falling trading revenue last year amid unusually calm markets.
“We expected an improvement in fixed income trading revenues,” Pri de Silva, a senior banking analyst at CreditSights, said before results were released. “That should bode well” for competitors including Goldman Sachs Group, Morgan Stanley and Citigroup, De Silva added.
JPMorgan climbed 0.6 percent to $62.07 in early trade in New York. Revenue in the quarter increased 4.1 percent to $24.8bn, mostly driven by gains at the corporate and investment bank.
Macro events
Profit in Pinto’s division climbed 19 percent to $2.54bn, the biggest increase in the company’s four main businesses. The company said “macro events” drove robust client activity in currencies, emerging markets, rates and equities.
Fixed income trading revenue rose 4.5 percent to $4.07bn, exceeding the $3.94bn average estimate of analysts surveyed. Equity trading revenue advanced 22 percent to $1.61bn, beating the $1.41bn estimate.
Investment banking fees also rose, fuelling a 12 percent increase in the division’s revenue to $3.1bn.
Higher capital requirements prompted JPMorgan, the biggest investment bank, to lower its target for returns at that business to 13 percent from 15 percent, according to a February presentation.
The firm was also considering whether to shrink in areas including interest rates trading and prime brokerage because of the new rules, Pinto said.
Net income from consumer and community banking, run by Gordon Smith, increased 12 percent to $2.22bn as revenue advanced 2 percent and expenses declined 4 percent.
JPMorgan said profit in asset management, run by Mary Erdoes, rose 11 percent to $502 million.
Assets under management climbed $111bn to $1.8 trillion amid greater inflows and rising equity markets.
capital
Trading revenue had a ‘very strong’ start to the year as higher volatility boosted volume.
Commercial banking, the unit run by Doug Petno, posted a 1 percent profit increase to $598m. The division’s provision for credit losses was $61m, up $56m from a year earlier as the bank set aside more reserves related to loans to energy companies.
JPMorgan shares traded at a discount to the estimated valuations of its four main businesses, leading analysts including Richard Ramsden of Goldman Sachs to examine whether the firm would be worth more split into pieces.
The bank’s valuation was hurt by uncertainty around future legal costs, chief executive Jamie Dimon said last week in his annual letter to investors. The firm, which has posted more than $36bn in legal costs since the financial crisis, might see those expenses ”normalise” by 2016, he said.
“Though we still face legal uncertainty, particularly around foreign exchange trading, we are determined to reduce it,” Dimon said in the letter. – Bloomberg ANGOLA, where less than twothirds of the population has access to clean water, was investing $5 billion (R60bn) in water projects, the state-run news agency Angop reported. The funding covered a fouryear period to 2017, Secretary of State for Water Luis Felipe da Silva told the World Water Forum in Korea this week. Africa’s second-largest crude oil producer is promoting the preservation of supplies, sustainable use and water security, according to da Silva. Angola, recovering from a 27year civil war that ended in 2002, was affected by a drought from 2012 to 2014. – Bloomberg
NIGERIA
FBN Holdings expected to benefit from a surge in sales of bonds by state governments to replace dwindling oil revenue after peaceful elections bolstered investor confidence, the owner of First Bank Nigeria said. “We expect a lot of the state governments to go to the market to issue bonds to be able to fund their projects,” chief executive Bello Maccido said. Nigerian bonds and equities surged as President Goodluck Jonathan conceded defeat to former military ruler Muhammadu Buhari following the March election, soothing investors’ concerns that a disputed result might cause election-related violence. – Bloomberg
ZAMBIA
ZAMBIAhad proposed to set its mining royalties at 9 percent for both open-pit and underground mines, a source in the presidency said yesterday, in an attempt to prevent looming job cuts and mine closures. Zambia’s decision to increase royalties for open-pit mines to 20 percent from 6 percent and those for underground mines to 8 percent from 6 percent in January had rattled unions and miners, forcing the government to review the plan. Some global mining firms expressed concern that the royalties could harm earnings, and some warned of shaft closures that could lead to the loss of about 12 000 jobs. – Reuters