JPMorgan gets boost from better economy, trading

Fri Apr 13, 2012 1:16pm EDT
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By David Henry

(Reuters) - An uptick in trading and dealmaking lifted JPMorgan Chase & Co's first-quarter profits out of the funk of late 2011, but the recovery fell short of the good times the largest U.S. bank enjoyed a year ago.

The results beat Wall Street expectations. Investment banking revenue rebounded from the 2011 fourth quarter as fears about the European debt crisis eased, prompting more companies and investors to return to fixed-income and equity markets.

JPMorgan also got a boost from improvements in credit quality and loan demand - a trend seen in the performance of Wells Fargo & Co as well. The No. 4 U.S. bank separately reported higher first-quarter profit as mortgage banking improved and it set aside less money for bad loans.

"The revenue is what really impressed me," said Joe Terril, founder of Terril & Co, a money manager in St. Louis, Missouri, referring to a 24 percent jump in JPMorgan's total revenue from the fourth quarter.

"It tells me there's more economic activity, maybe, than what we were previously thinking - more demand for credit, more demand for banking services, more business out there," he said.

The results from two of the largest U.S. banks confirm investor optimism that has fed a market rally this year. The KBW index of bank stocks is up more than 20 percent this year, and JPMorgan shares are up 32 percent.

But on Friday, investors appeared no longer satisfied with just tentative signs that the economy is on a path to recovery; they now want to gauge its strength, and JPMorgan's numbers gave them reasons to take a breather.

The bank's net interest margins - a core measure of profitability of banks - fell, and JMP Securities analyst David Trone said traditional banking revenue other than mortgage banking remained sluggish.   Continued...

A flag hangs on the wall of the JP Morgan company stall on the floor of the New York Stock Exchange in New York July 15, 2010. REUTERS/Lucas Jackson