JPMorgan profit rises as fixed-income trading rebounds

By Tanya Agrawal and David Henry

(Reuters) – JPMorgan Chase & Co, the biggest U.S. bank by assets, reported a better-than-expected quarterly profit after a decision by the Swiss central bank to remove a cap on the franc shocked markets and spurred trading in currencies and bonds.

Bond trading revenue has been under pressure across Wall Street in recent years, and it is unclear if increases in customer volume in the first quarter will persist.

Chief Financial Officer Marianne Lake told reporters that volumes for the second quarter seemed to be a bit lower so far, although she added that it is too soon to say for sure.

JPMorgan’s revenue from trading fixed income, currencies and commodities (FICC) by 5 percent to $4.07 billion in the first quarter.

The strong investment banking results helped boost JPMorgan’s shares by as much as 2.5 percent to $63.61 on Tuesday morning, their highest since April 2000.

JPMorgan’s investment bank is the world’s biggest by revenue, according to research firm Coalition. Revenue from the business rose 8.4 percent to $9.58 billion in the quarter.

But the unit has been under pressure to cut costs as clients have reduced trading since the financial crisis and regulators have demanded that big banks take fewer risks, hold more capital and improve controls.

JPMorgan was the first big U.S. bank to report for the quarter, and the strong performance by its investment banking division bodes well for other banks with big trading businesses, such as Goldman Sachs Group Inc and Morgan Stanley. Goldman reports on Thursday and Morgan Stanley on Monday.

Goldman’s shares were up 0.7 percent at $197.03 at midday, while Morgan Stanley’s were up 0.8 percent at $36.61.

MORTGAGE LENDING JUMPS

Profit at Wells Fargo & Co, the No. 1 U.S. mortgage lender, which also reported on Tuesday, fell as the bank faced higher compensation costs and pressure on the profitability of its loans.

Those results may bode poorly for regional banks due to report in the coming days.

Both Wells Fargo and JPMorgan posted better results from mortgage lending.

JPMorgan’s home loans, including refinancings, jumped 45 percent to $24.7 billion as mortgage rates hovered near two-year lows.

However, the bank’s overall interest margin, a key measure of loan profitability, fell to 2.07 percent from 2.20, reflecting the effect of low interest rates.

Net income rose to $5.91 billion, or $1.45 per share, from $5.27 billion, or $1.28 per share, a year earlier.

Analysts on average had expected earnings of $1.40 per share, according to Thomson Reuters I/B/E/S.

The results included an after-tax charge of $487 million for legal expenses. The bank has said its legal troubles should normalize by 2016.

JPMorgan’s revenue increased 3.7 percent to $24.07 billion while expenses, adjusted for legal costs, fell by $402 million to $14.2 billion. Money set aside to cover bad loans rose 12.8 percent to $959 million.

(Additional reporting by Sweta Singh; Editing by Ted Kerr)