JP Morgan hurt by bond trading crunch

Tim Wallace
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JP Morgan’s chief executive and chairman Jamie Dimon
Bond trading revenues dived again at JP Morgan, the bank said in its second quarter update yesterday, leading profits down eight per cent on the year.
But the giant bank’s shares still bounced back as the results were not as bad as investors had previously feared – its price jumped 3.86 per cent.
Revenues at JP Morgan fell three per cent to $25.3bn (£14.8bn), while noninterest expenses dipped three per cent to $15.4bn.
The bank also paid $500m of legal expenses in the quarter.
As a result profits dropped from $6.5bn to $6bn, and return on tangible equity fell from 17 per cent to 14 per cent in the most recent quarter.
By business unit, the markets and investors services arm performed particularly poorly with revenues down 12 per cent to $5.9bn.
Fixed income revenues dived 15 per cent on the year, as the squeeze on bond traders continued – bond prices have fallen, and new regulation is cutting into margins.
Equity markets revenue also fell 10 per cent to $1.2bn. But security services revenue rose five per cent to $1.1bn, as deposits increased to give greater interest income.
Profits in consumer and community banking fell 21 per cent to $2.4bn, led by rising bad debt provisions at $854m.
But commercial banking profits increased six per cent to $658m on falling loan losses.
JP Morgan’s common equity tier one capital ratio dropped from 10.4 per cent to 9.8 per cent, though chairman and chief executive Jamie Dimon insisted the bank is maintaining its ‘fortress balance sheet.’
Dimon also argued there are still strong points, noting the investment bank is leading the industry league tables in fee revenues so far this year.
“Toward the end of the quarter, we saw encouraging signs across our businesses including an uptick in wholesale utilisation, strengthening pipelines in our commercial and business banking segments, and some improvements in markets activity,” he said.
Headcount at the bank fell 8,871 on the year to 245,192.


JP Morgan’s chief executive and chairman Jamie Dimon yesterday told investors they should not be overly worried about his cancer diagnosis.
The long standing boss of the bank insisted the prognosis is good and that plans are in place should he be out of action for any period of time.
“I feel great, I think I have some of the best doctors in the world, I’ll be receiving the best treatment, I’m very fortunate that this is curable,” he said on a conference call yesterday. “We caught it early, it is confined to the original site,” he said of the cancer in his neck.
Lead director Lee Raymond will step in should he be unavailable “for a minute, an hour, a day or a week.”
“The thing you think about most is your family, of course, as much as I love JP Morgan,” Dimon said.

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