JPMorgan Chase, the second-largest U.S. bank by assets, reported a 13 percent jump in profits, to $5.4 billion, as lending continued to slide, fewer borrowers fell behind on their payments and problems with its mortgage practices again dampened earnings.
The lender’s overall revenues were up 7 percent to $26.8 billion, thanks to increased fees from its various units, offsetting declining interest income from lending to borrowers. Its profit was also boosted by a release of $1.2 billion in reserves back into income, helping it to beat analysts’ estimates.
The bank set aside less cash to cover potential losses on soured loans, further boosting earnings and indicting that the lender believes the number of delinquent borrowers will continue to dwindle as the slumping economy slowly improves. The company set aside $1.8 billion to cover credit losses, a 46 percent decrease from the same period last year, its earnings documents show.
JPMorgan, which traditionally kicks off banks’ quarterly earnings season, is a good proxy for the state of the industry and for the broader economy because of its size and reach. Its business and corporate lending rose 15 percent, but its consumer loans dropped 7 percent relative to last year. Though the bank has less overall loans outstanding, its trading assets have soared 15 percent since last year, to $458.7 billion. Profits from its investment banking unit surged 49 percent to $2.1 billion. Compensation to bank employees is up 6 percent year to date to $15.8 billion.
The bank, benefiting from its status as a giant bank, grew even larger, increasing its assets 12 percent from last year to $2.2 trillion. Its deposit base also jumped, rising 18 percent to more than $1 trillion.
But as the bank beat expectations, which predicted that trading revenue would slump and revenue growth would shrink, its mortgage business continues to drag down its bottom line.
The New York-based company recorded about $2.5 billion in mortgage-related losses, split between costs of “foreclosure-related matters” like settlements with regulators and borrowers for home seizure abuses, additional litigation reserves and losses from buying back soured mortgages from investors and home loan giants Fannie Mae and Freddie Mac.