Along expected lines ( expected to outperform, beat expectations and harness mortgage markets due to continuing refi boom) JP Morgan handsomely published a $6.5 Bln jumping 1 in 3 over the year ago outperformance of $4.9 Bln despite having rid itself of any release in loss reserves which would contribute to Chase Business profits but at a much lower clip in 2013 across all big banks than was the norm in the 2010-2012 period. After a gap of almost 4 years and despite the interest rate jump in the middle of the active quarter, rates up 60% since mid may and at above 4.5% in mortgages, the robust growth in Revenues at $25 Bln caps a successful comeback for the banks on the bourses in late 2012 and continuing in the early part of this year before the ramping up of the QE withdrawal program finally spooked the markets worried by an insidious recovery.
The press release confirms $49 B in mortgages originated in the quarter and the analyst meet starts at 8:30 am ET
Despite the continuing HAMP and HARP programs, the market expectations of a slowdown in mortgages and efforts to drown the QE withdrawal in a sea of doubt led by a run on bonds as banks try to come out of the bind exodus on the right side till demand re emerges, means the Q2 earnings will go unnoticed by the markets
Originations volumes are a good 30% up on Q1 data. Basel 3 Tier I common at 9.3% is designed currently to absorb super shocks from regulators for TBTF banks led by JP Morgan amd liuidity ratios being introduced will be adequately handled at 118% against a 100% target
The Bank absorbed significant loan loss reserve released profits in conservative litigation reserves and does not see a significant downside. CIB Trading business volumes were robust with rvenues consistent on quarter at $9.9Bln against $10 bln Trading client evenues totted up 45.4 Bln and Securities Services reported alongside for $11.1 bln in revenues
The retail business continued steady ships with $12.0 Bln revenue and reported income of $3.1 Bln including $105 B in card sales. lower deposit margins continue to plague the big banks, but the situation would ameliorate itself in 3-4 quarters in natural course from here and one does not see deposit rates moving down or up in this light with robust double digit growth in deposits in the quarter
Auto Loans continue to show near 205 growth over 2012 data for the business in Q2 as in Q1 Mortgage business is down 7% sequentially with $1.1 bln contribution to Net income
Servicing income has started growing again to $133 mln against $582 mln from origination (pre tax)
CIB Topline of $9.9 Bln translated into a $2.8 Bln profit apat from improving inordinatey over year ago numbers, margins being higher from $370 mln lower Non interest expenses in the unit down 6% sequentially
Investment Banking Fees remained $1.7Bln beating others in the industry with continuing origination of municipal and HY debt for a starved market in the products though the spiking rates will contribute to a slowdown coinciding with Dodd Frank rules being launched at the end of the quarter, raising issues to warehousing limits imposed int he law for market makers and clearing conditions imposed on derivatives.
Commercial banking and Asset management businesses also seem stable and further developments related can be worked out after the analyst review is completed.
- Earnings Outlook: What to watch in J.P. Morgan, Wells Fargo earnings(marketwatch.com)
- Morgan Stanley Sees Earnings Beats From BofA, JPM, PNC, COF; Citi, Goldman Will Miss(blogs.barrons.com)
- JP Morgan Beats Expectations(businessinsider.com)