JPMorgan’s record trading helps ease pandemic’s toll on profit

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JPMorgan Chase’s results were one more marker of the disconnect between ebullient markets and concern about the U.S. economy.

The biggest U.S. bank said second-quarter profit fell 51% to $4.69 billion, a smaller drop than forecast, as record trading revenue helped counter the biggest loan-loss provision in the firm’s history. It’s the second consecutive quarter that trading set a record, as the bank’s Wall Street unit is helping prop up a consumer lending division struggling with business closures and swelling unemployment rolls.

The firm’s fixed-income trading revenue doubled from a year earlier and the equity markets unit surged more than 30% as trading desks have benefited from a roller-coaster year. After the pandemic drove stocks into the fastest bear market ever in March, the S&P 500 mounted one of the biggest rallies in nine decades, boosted by stimulus measures and optimism over a swift economic rebound.

“We are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm,” Chairman and CEO Jamie Dimon said in a news release “This is why we can continue to serve all of our stakeholders and to pay our dividend — unless the economic situation deteriorates materially and significantly.”

The bank generated $9.7 billion from trading stocks and bonds, 79% more than a year earlier, a bigger jump than analysts were expecting. That and a 91% gain in investment-banking fees helped the bank easily remain profitable even as it set aside a record $10.5 billion to cover future bad loans, more than analysts expected.

Despite the surprise profit win, JPMorgan’s balance sheet is showing more signs of stress than it did at the end of the first quarter, when stay-at-home orders were still just a few weeks old. Net charge-offs, overdue loans the bank no longer expects to recover, rose 6% from the first three months of the year to $1.56 billion in the second quarter, far less than the $2.78 billion predicted by analysts.

Loan defaults could surge even more in the second half of the year as the effect of the government’s stimulus measures and the bank’s loan-deferral programs start to wear off.

In all, second-quarter net income fell to $4.69 billion, or $1.38 a share, from $9.65 billion, or $2.82, a year earlier. That beat the $1.01 per-share average estimate of 25 analysts surveyed by Bloomberg.

Revenue from fixed-income underwriting rose 55% to $1.27 billion as companies rushed to borrow after the Fed set up an unprecedented series of programs to support corporate debt markets and slashed interest rates.

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Earnings Fixed income Credit quality JPMorgan Chase Jamie Dimon Coronavirus