JPMorgan Chase & Co. (NYSE: JPM – $85.08), the nation’s largest bank, reported first quarter profits rose 17%, boosted by trading and investment banking fees. Trading revenue increased 13% to $5.82 billion and fixed-income trading revenue climbed 17%, thanks in part to higher activity in trading government bonds and other securities closely tied to interest rates. Equities trading revenue edged up 1.9%. By business group, the Corporate & Investment Bank and Commercial Banking segments posted strong revenue and profit advances. But Consumer & Community Banking profits fell 20%, hurt by lower mortgage servicing income, new credit card origination costs, higher auto lease depreciation expense, increased credit card loan losses and the write down of student loans. While the company’s Asset & Wealth Management profits were pressured by higher legal expenses, assets under management were $1.8 trillion, up 10%, reflecting higher market levels and net inflows.
For the quarter, Chase reported a profit of $6.45 billion, or $1.65 per share, on a 6.2% increase in adjusted revenue of $25.59 billion. Analysts had expected per share earnings of $1.52 and revenue of $24.88 billion. Return on equity, a measure of the JPMorgan’s profitability, was 11% in the quarter compared with 9% in the first quarter a year ago. The company’s loan loss provision declined 28% to $1.32 billion, with a decrease for commercial loans partly offset by higher credit card loan charge-offs and a write down of student loans. The improving outlook for energy companies led Chase to release $133 million in business-loan reserves.
The results for the quarter showed that the momentum that drove trading, investment banking and lending revenue higher for much of last year continued into the start of 2017. The near-term earnings outlook is mostly positive, despite a few headwinds. Mortgage and credit card revenues may continue to disappoint and management expects operating expenses in 2017 to increase about 4%, as investments in mobile banking and processing technology will likely remain high. Too, management looks for about $5 billion in loan losses in 2017, up from $4.3 billion last year, as well as a higher tax rate over the remainder of 2017. For the full year, analysts are estimating per share profits of $$6.58, compared to last year’s $5.91, and upwards of $7.60 for 2018. The shares, yielding 2.3%, remain a solid holding in most aggressive accounts.