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Finance

J.P. Morgan returns to profit

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October 14, 2014, 7:17 AM ET
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By Tanya Agrawal and David Henry

JPMorgan Chase & Co reported a third-quarter profit as the biggest U.S. bank boosted revenue from trading and investment banking, and moved past the huge legal claims that pushed it into a rare loss in the same quarter last year.

The bank, confirming figures leaked earlier on an investment website, said it recorded net income of $5.6 billion, or $1.36 per share, for the three months ended Sept. 30, compared with a loss of $380 million a year earlier.

Analysts had expected earnings of $1.38 per share, according to Thomson Reuters I/B/E/S.

“The Corporate & Investment Bank saw strong performance in fees, maintaining a #1 position in global (investment banking) fees year to date, with particular strength in equity capital markets,” Chief Executive Jamie Dimon said in a statement.

“In Markets, we saw increased activity and better performance overall, particularly in currencies and emerging markets,” he said.

The quarterly report was the bank’s first since Dimon, 58, underwent radiation and chemotheraphy treatment for throat cancer. The illness has raised questions about who might succeed him if he has to step down.

The bank was hit last year by an after-tax expense of $7.2 billion to settle government allegations of wrongdoing related to mortgage instruments before the financial crisis. The latest results included a legal expense of $1 billion after tax.

However, the bank said it expected total adjusted expenses for 2014 to be above the $58 billion, excluding legal costs, that it had forecast. Costs totaled $59 billion in 2013.

Revenue from fixed-income, currency and commodity trading rose 2.1 percent to $3.51 billion in the latest quarter compared with a year earlier, and was also slightly higher than in the preceding quarter.

Market activity picked up in September, largely due to the European Central Bank’s efforts to stimulate growth and a batch of data suggesting the U.S. economy was strengthening.

The surprise exit of superstar Bill Gross from bond trading giant Pimco also spurred bond market activity in late-September.

Modest growth

“Growth is modest. The headline numbers have come out slightly below expectations, but the model of stability is there, and that’s ultimately what you want from a bank,” said Simon Maughan, head of research at financial analysis firm OTAS Technologies in London.

The bank did not provide a figure for costs related to an attack on it computers that was discovered in August and exposed the names and contact information of some 76 million households and seven million small businesses.

JPMorgan suffered another technical embarrassment on Tuesday when its results appeared on website shareholder.com hours ahead of their scheduled release time.

Bank spokesman Joe Evangelisti acknowledged that there had been a problem at shareholder.com, a Nasdaq OMX-owned website that hosts investor relations information for the bank, but did not explain how the early release happened.

The bank’s total investment banking revenue rose 2 percent to $1.54 billion, driven by higher advisory fees.

Net income from mortgage banking fell 38 percent $439 million.

Mortgage lending by U.S. banks has been shrinking as fewer homeowners refinance. JPMorgan has also been backing away from making home loans to less creditworthy borrowers because of doubts about its ability to recover money in foreclosures.

JPMorgan is the first of the big U.S. banks to report for the quarter. Citigroup Inc and Wells Fargo & Co also report on Tuesday. Bank of America Corp, the second-biggest U.S. bank, will report on Wednesday.

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