JPM JP Morgan Chase and Co

By Emily Glazer and Peter Rudegeair 

J.P. Morgan Chase & Co. said its first-quarter profit rose 17% as a boost from trading helped results for the nation's biggest bank by assets.

Earnings and revenue beat expectations, pushing shares up 0.5% premarket.

The New York bank reported a profit of $6.45 billion, or $1.65 a share. That compared with a profit of $5.52 billion, or $1.35 a share, in the same period of 2016. Analysts polled by Thomson Reuters had expected earnings of $1.52 a share.

Adjusted revenue rose 6.2% to $25.59 billion. Analysts had expected $24.88 billion.

The results showed that the momentum that drove trading, investment-banking and lending revenue higher for much of last year continued into the start of 2017, but many investors are more focused on future policy changes. Shares in J.P. Morgan and other banks rallied following the election on the thesis that a Trump administration would usher in a new approach to bank regulation, but that is yet to happen.

"People are serious about wanting to make appropriate change to the regulatory environment, and we will be appropriately engaged," Chief Financial Officer Marianne Lake said on a conference call with reporters.

The boost from still low -- but rising -- interest rates will also likely be a major focus, as an increase in rates helps the profitability of big consumer lenders like J.P. Morgan. Net interest income rose 6% to $12.06 billion in the first quarter, and the bank said to expect it to be up about $4.5 billion for all of 2017.

Recent increases in short-term lending rates by the Federal Reserve should over time lead to higher profit margins for banks. Just how big those profits will be depends as well, though, on the steepness of the yield curve. J.P. Morgan said its forecast was based upon the current implied yield curve.

J.P. Morgan's trading revenue increased 13% to $5.82 billion from $5.17 billion in the first quarter of 2016. Fixed-income trading revenue climbed 17% thanks in part to higher activity in trading government bonds and other securities closely tied to interest rates in advance of elections in Europe. Equities trading revenue edged up 1.9%.

J.P. Morgan extended $22.4 billion in mortgages in the quarter, unchanged from the first quarter a year ago. Revenue in its mortgage division, one of the largest in the U.S. by volume, fell 18% to $1.53 billion due to weaker servicing results.

Overall profit at the corporate and investment bank was $3.24 billion, up nearly two-thirds from $1.98 billion in the same period last year. In the consumer bank, profits were $1.99 billion compared with $2.49 billion in the first quarter a year ago.

J.P. Morgan's commercial bank earned $799 million, a 61% increase from the $496 million it earned in the year-ago quarter, and the bank's asset management unit reported profits of $385 million, down one-third from the first quarter of 2016.

Costs increased 8.5% to $15.02 billion from $13.84 billion a year earlier, an effort the bank continues to drill down on. Executives said in a February investor presentation that expenses are expected to rise in 2017 to fund investments and growth.

Legal costs totaled $218 million in the first quarter, compared with no material costs in the same period a year ago and $230 million in the fourth quarter.

J.P. Morgan set aside $1.32 billion in the first quarter to cover loans that could potentially turn bad in the future. That compares to $1.82 billion in the first quarter of 2016 and $864 million in the fourth quarter of 2016.

The improving outlook for oil and gas companies led J.P. Morgan to release $133 million in business-loan reserves, but a writedown in its student-loan portfolio and higher expected defaults on credit cards prompted a $380 million addition to its consumer-loan reserves.

The bank lost $1.65 billion to loan defaults, or 0.79% of its overall portfolio, compared to a 0.60% charge-off rate in the fourth quarter of 2016. For all of 2017, the bank expects net charge-offs to be around $5 billion.

Return on equity, a measure of the J.P. Morgan's profitability, was 11% in the first quarter compared with 9% in the first quarter a year ago. J.P. Morgan had faced questions from analysts, investors and shareholders over recent years over whether it might be better for shareholders if the global bank broke itself up into smaller, more manageable units. Initially the industry thought Mr. Trump's election and the discussion of lighter regulation would table that discussion but recently top Trump officials have suggested otherwise.

J.P. Morgan's shares rallied following the U.S. presidential election, but since the start of the year they down about 1%. That compares with a 2.7% fall in the KBW Nasdaq index of bank stocks.

Write to Emily Glazer at emily.glazer@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com

(END) Dow Jones Newswires

April 13, 2017 09:29 ET (13:29 GMT)

JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Mar 2024 to Apr 2024

JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Apr 2023 to Apr 2024