NEW YORK, N.Y. – JPMorgan Chase, the biggest U.S. bank by assets, said Friday its first-quarter earnings fell 20 per cent, driven by a decline in investment banking and mortgage lending.
EARNINGS: The bank reported net income of $4.9 billion for the first quarter, after stripping out payments to preferred stockholders. That was down from $6.1 billion in the same period a year earlier.
MISSED EXPECTATIONS: On a per-share basis, the earnings amounted to $1.28. That was worse than estimates of analysts polled by FactSet, who had been expecting $1.39.
LOWER REVEUE: Revenue, after stripping out the effect of an accounting charge for credit losses, was $23.8 billion, down 8 per cent from $25.8 billion a year earlier.
FIXED INCOME TRADING: Revenues at the bank’s fixed income trading business, part of its investment banking unit, slumped 21 per cent to $3.8 billion. Jamie Dimon, JPMorgan’s CEO and Chairman said that the business was still performing well given the market environment.
“I look at it as doing fine, it’s just not that predictable a business,” Dimon said. “There’s nothing wrong with that, you just have to deal with it over time.”
MORTGAGE BUSINESS SLOWS: The bank’s mortgage business continued to slow. The increase in bond yields since last summer has caused mortgage rates to rise, which in turn has slowed refinancing of home loans. Revenue at the bank’s mortgage unit was $1.6 billion, down $1.1 billion from the same period a year earlier. The bank said mortgage originations plunged 68 per cent to $6.7 billion, compared with the same period last year.
The bank doesn’t expect the trend to change anytime soon. Chief Financial Officer Marianne Lake told reporters on a conference call to “expect that trend to be relatively consistent.”
TRIMMING COSTS: Expenses at the bank fell 5 per cent to $14.6 billion in the first quarter. JPMorgan said last month that it plans to eliminate 8,000 jobs this year as its mortgage business shrinks and it aims to control costs at branches.
BRIGHT SPOTS: Revenue from private banking rose 4 per cent to $1.5 billion and auto loan originations rose 3 per cent to $6.7 billion. Credit card sales volumes also grew.
THE QUOTE: Even though the bank had warned investors in February that trading revenues would be weak, the decline was still bigger than expected, said Jeff Morris, head of U.S. equities at Standard Life Investments.
“These results underscore that JPMorgan is a well-managed bank, but they can’t decouple from the current economic and market environment,” Morris said in emailed comments.
STOCK REACTION: JPMorgan fell $2.10, or 3.7 per cent, to close at $55.30 Friday. The bank’s stock has fallen 5.4 per cent this year following a 33 per cent rise in 2013.