JPMorgan profit weaker than expected as trading revenue falls

Fri Apr 11, 2014 4:10pm EDT
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By David Henry and Tanya Agrawal

(Reuters) - JPMorgan Chase & Co posted far weaker-than-expected quarterly profit as uncertainty about the U.S. economy weighed on investor trading volumes and consumer borrowing.

Results from the first of the major Wall Street banks to post earnings underscore how difficult the first quarter was for the financial sector. JPMorgan's bond trading revenue plunged 21 percent, and mortgage lending revenue fell 84 percent from the same quarter last year.

Most of the bank's big businesses, including commercial lending and credit cards, delivered lower profits. But the bank is not responding by dialing up its risk-taking in commercial lending, and it views falling revenue in its bond trading business as part of a business cycle instead of a symptom of a broad-based and lasting decline in fixed-income trading.

"It's not like selling cereal - it's not like your volumes go up 2 percent every day," Chief Executive Jamie Dimon said to reporters on a conference call. The business will grow over the next decade or two, he added.

Dimon, who earned plaudits for keeping his bank consistently profitable during the financial crisis, is struggling to figure out how to navigate the current environment.

In his annual letter to shareholders earlier this week, Dimon noted that JPMorgan will have spent more than $2 billion more than usual from 2012 through the end of this year on complying with new rules, and devoted more than 1 million work hours to meeting new mortgage rules. The bank's net income dropped 16 percent last year due to massive legal settlements and rising compliance costs.

Friday's results showed how the bank's troubles appear to be extending beyond outsized legal settlements and meeting new rules, and into areas more fundamental to the business, such as loan demand and trading volume.

Overall, net income fell 19 percent to $5.27 billion, or $1.28 per share, from $6.53 billion, or $1.59 per share, in the same quarter of 2013, the biggest U.S. bank said on Friday.   Continued...

The offices of JP Morgan in the Canary Wharf district of London, January 28, 2014. REUTERS/Simon Newman