Money center bank JPMorgan Chase & Co. (NYSE: JPM – $115.02) reported a better-than-expected quarterly profit as higher interest income and buoyant consumer lending offset lower activity at its trading desks. Net revenue rose 4% to $29.57 billion and net income climbed 16% to a record $9.65 billion with earnings of $2.82 per share. Analysts were expecting adjusted earnings of $2.50 per share and revenue of $28.9 billion. The results included $768 million of income tax benefits equal to a $0.23 increase in earnings per share. The earnings beat was driven by JPMorgan’s Consumer Bank, the company’s largest business, which rose 22% to $4.17 billion, offsetting declines across its other main businesses. The Corporate & Investment Bank and Commercial Bank segments were negative by 8% from last year. The Asset and Wealth Management business saw a decline of 5%. Even as the world’s biggest bank recorded record earnings, there were warning signs that the playing field is beginning to tilt against the financial industry. JPMorgan’s net interest margin declined to 2.49% from 2.57% a year ago as deposit rates rose and the rate the bank paid on other borrowings rose.
Management expects full-year net interest income to be around $57.5 billion, a view that’s lower than the $58 billion projected in the first quarter’s results. The Federal Reserve is expected to cut its benchmark lending rate later this month, and lower interest rates can curb a bank’s earnings from lending. Nonetheless, full-year profits should come in at around $9.97 per share and next year is tentatively estimated by analysts at $10.61. Investors willing to ride the often-volatile banking business should continue to do well with a holding in high-quality Chase with its growing dividend yielding 2.8%.