JPMorgan Chase & Co.'s second-quarter earnings rose 36% on strong investment-banking results, with the profit smashing analysts' expectations like Wall Street titan Goldman Sachs Group Inc. did Tuesday.
Investment banking and a boom in mortgage refinancing were expected to help large U.S. banks offset rising losses from bad loans, but investors are looking for whether troubled loans will continue to rise and whether the refinance boom can last. Credit-loss provisions fell 3.6% from the first quarter at JPMorgan.
Although its mortgage and credit-card businesses are being hurt badly by rising unemployment and the recession, its traditional Wall Street businesses are booming.
The results come just two days after Goldman Sachs said profit soared on record results in trading and stock underwriting, signaling a turnaround for the firm less than a year after the credit markets seized up and forced many competitors out of business.
JPMorgan Chairman and Chief Executive Jamie Dimon said the company was pleased with results despite the continued difficult economic environment. He added the company expects the high levels of credit costs in its consumer lending and card services division to remain high for the foreseeable future.
JPMorgan — which vaulted into first place in nationwide deposits following its $1.9 billion September acquisition of Washington Mutual — posted income of $2.72 billion, or 28 cents a share, up from $2 billion, or 53 cents a share, a year earlier. The latest results included 27 cents in charges related to its TARP repayment, as expected, and a 10-cent Federal Deposit Insurance Corp. special assessment.
Revenue increased 41% to $27.71 billion.
Analysts polled by Thomson Reuters expected earnings of 4 cents on revenue of $25.89 billion.
Credit-loss provisions were $9.7 billion, more than double a year earlier as the net charge-off rate doubled to 6.2% from 3.1%.
At the investment-banking business, revenue jumped 33% while the segment's profit more than tripled on record investment-banking fees and strong fixed-income markets performance.
JPMorgan said its Tier 1 capital ratio, a key measure of financial strength, was 9.7%, up from 9.2% a year earlier but down from 11.4% in the prior quarter.
The company was among the 10 large banks that repaid funds it received under the Treasury Department's Troubled Asset Relief Program. JPMorgan got $25 billion under TARP.
Shares were down 5 cents in premarket trading at $36.21.