JP Morgan earnings surpass expectations

US bank JP Morgan has reported a second quarter net income of $6.5bn, or $1.60 per share, beating expectations of $1.44 (slides).

The bank reported strong performance across its businesses, with consumer deposits up ten per cent year-on-year, credit card sales volumes also up ten per cent to a record $105.2bn and the seventeenth consecutive quarter of positive net long-term client flows ($25bn in second quarter).

The bank also exceeded proposed Basel III capital requirements, and chairman and chief executive Jamie Dimon said it is “committed to achieving a Basel III Tier 1 common ratio of 9.5 per cent by the end of this year”.

Mortgage originations were up 12 per cent year-on-year to $49 bn, but down seven per cent from the first quarter. Mortgage application volumes, meanwhile, were down three per cent from a year ago, but up seven per cent from the first quarter. Lower mortgage fees contributed to a seven per cent year-on-year fall in consumer banking fee revenues.

But Dimon said he was confident that the US economy is improving and concluded:

I am proud of this Company and what our employees do every day to serve our clients, customers and communities in over a hundred countries.

The results included the following significant items:

  • $950 million pretax benefit ($0.15 per share after-tax increase in earnings) from reduced loan loss reserves in Real Estate Portfolios
  • $550 million pretax benefit ($0.09 per share after-tax increase in earnings) from reduced loan loss reserves in Card Services
  • $600 million pretax expense ($0.09 per share after-tax decrease in earnings) for additional litigation reserves in Corporate