J.P. Morgan's Revenue Slides on Weak Trading Results -- 3rd Update
October 13 2015 - 05:39PM
Dow Jones News
By Emily Glazer And Peter Rudegeair
J.P. Morgan Chase & Co. said its third-quarter revenue
declined as the bank wrestled with volatile markets and continued
low interest rates, while its profit rose, partly thanks to a big
tax benefit.
Shares dropped 1.2% to $60.81 after hours.
The largest U.S. bank by assets reported a profit of $6.8
billion, or $1.68 a share. That compares with a profit of $5.57
billion, or $1.35 a share, in the same period of 2014. Excluding
$2.2 billion of tax benefits and other one-time items, earnings
were $1.32 a share in the latest period.
Analysts polled by Thomson Reuters had expected earnings of
$1.37 a share.
Revenue fell 6.4% to $23.54 billion. Analysts had expected
$23.69 billion.
Trading revenue decreased 15% to $4.34 billion from $5.07
billion in the third quarter of 2014. Chief Executive James Dimon
said at an investor conference in September that trading results
would be "similar" to other banks, following comments from Bank of
America Corp. and Citigroup Inc. executives that revenue at their
units trading equities, bonds, currencies and commodities were
expected to fall about 5% in the third quarter.
"We had decent results this quarter," Mr. Dimon said in a
statement. "We saw the impact of a challenging global environment
and continued low rates reflected in the wholesale businesses'
results, while the consumer businesses benefited from favorable
trends and credit quality."
The bank reported a 4.5% year-over-year rise in investment
banking revenue to $1.61 billion for the quarter and reported a 35%
drop in equity underwriting fees. Debt underwriting fees, however,
rose 17% compared with last year's third quarter, and advisory fees
for M&A also rose 22% year over year.
Costs decreased 2.7% to $15.37 billion from $15.8 billion in the
third quarter of last year. Banks have been under continued
pressure to keep costs in check as interest rates have remained
low, which limits the profit margins in lending businesses.
Overall, the bank's legal tab totaled $1.3 billion in the third
quarter, higher than the $1.06 billion it reported in the same
period a year ago and the $291 million it recorded in the second
quarter. The Wall Street Journal reported over the summer that J.P.
Morgan is expected to settle in coming weeks with the Securities
and Exchange Commission and Commodity Futures Trading Commission
for more than $150 million regarding whether the bank steered some
clients into its own investment products without proper
disclosures.
Return on equity, a measure of the J.P. Morgan's profitability,
was 12% in the third quarter compared with 10% a year earlier. J.P.
Morgan faced some questions from analysts and investors earlier
this year over whether it might be better for shareholders if the
global bank broke itself up into smaller, more manageable
units.
On a call with journalists, J.P. Morgan finance chief Marianne
Lake touted the company's overall core loan growth. Ms. Lake noted
that loans grew across the bank's balance sheet. She noted that
credit card loans haven't seen growth in many quarters, and even
there, the credit card core loan growth picked up 3%.
The bank continued to cut its workforce last quarter, shedding
1,781 people to 235,678. That includes reductions across its
consumer & community banking and corporate divisions. In May,
The Journal reported the bank began to eliminate more than 5,000
jobs as it looks to save on expenses.
J.P. Morgan kicks off the third-quarter earnings season for
large U.S. banks, offering investors and analysts a snapshot of a
quarter that is expected to be characterized by a decline in bond
trading amid summer market swings and continued pressure on
revenue.
Shares in J.P. Morgan hit an all-time record of $70.61 in July
but have fallen 13% since then. For the year, they are down 1.7%
compared with a 5.1% decrease in the KBW index of bank stocks over
the same period.
Write to Emily Glazer at emily.glazer@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 13, 2015 17:24 ET (21:24 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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