NEW YORK — JPMorgan Chase & Co. generated stronger results than expected as it is recovering from its wounds caused by soured loans.
For the first time since the American economy started to recover, it was Main Street rather than Wall Street that lifted the bank's second quarter earnings, by 76% from a year earlier, to $4.8 billion.
The nation's third largest bank by assets topped analysts' estimates and improved net income in every line of business except investment banking--helped by a 23% reduction in reserves for loans unlikely to be paid back.
Shares were up 1.6% to $40.48 in premarket action — and the stock of Bank of America Corp. and Citigroup Inc. rose with it. The two banks are scheduled to report their results Friday.
Still, J. P. Morgan continues to shrink its assets as loans — including bad ones — roll faster off its balance sheet than it can make new ones. Small business loans grew at a healthy pace for the second consecutive quarter.
And Chief Executive Jamie Dimon poured his trademark cold water over any enthusiasm about the recovery in credit. In a press release, he said losses from bad consumer loans "remain at extremely high levels and therefore returns in our consumer-lending businesses are still unacceptable. As a result, these businesses did not meet expectations nor generate satisfactory returns on capital for our shareholders. It is too early to say how much improvement we will see from here."
JPMorgan said its investment-banking arm saw profit decline 6.1% as revenue decreased 13%, and profit soared at its retail financial services segment even as revenue declined.
The investment banking business generated $1.1 billion less in second quarter net income than in the first quarter (its profit was $1.4 billion)--while retail banking turned a $131 million first quarter loss into a $1 billion profit. And the credit card segment, which had generated losses for several quarters, swung to a $343 million profit.
JPMorgan managed to make it though the recession without reporting a loss, helped largely by its success in providing services to big companies, while other banks were pushed far into the red. Its results have now topped analysts' forecasts for four consecutive quarters.
JPMorgan reported a profit of $1.09 a share, up from 28 cents a share a year earlier. The most-recent quarter included a 36-cent benefit from a reduction in loan-loss reserves and a 14-cent charge for the U.K. bonus tax, while prior-year results included 37 cents of charges.
Revenue on a managed basis, which excludes the impact of credit-card securitizations and is on a tax-equivalent basis, fell 7.6% to $25.61 billion.
Analysts polled by Thomson Reuters had most recently forecast earnings of 67 cents on $25.59 billion in revenue.
Managed credit-loss provisions were $3.36 billion, down from $9.7 billion a year earlier and $7.01 billion in the previous quarter.