Investing.com - JPMorgan (NYSE:JPM) said its net profit fell by nearly half in the second quarter, due to a mammoth $10.8 billion charge for provisions against bad loans that was partially offset by a surge in revenue at its bond and equities trading operations.
Revenue and earnings per share both exceeded analysts’ forecasts however, prompting the stock to rise 4.3% in its initial response in premarket trading. It subsequently pared gains to be up 2.4% by 7:34 AM ET (1134 GMT).
"“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy," CEO Jamie Dimon said in a statement. "However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm."
Net profit fell to $4.69 billion, or $1.38 a share, from $9.56 billion in the second quarter of last year. But that was still better than a consensus forecast of $1.13 a share. Revenue, meanwhile, came in at $33.82 billion, up 17% from a year earlier and more than 10% above expectations.
The U.S.'s largest bank said it had built reserves of $4.6 billion on its wholesale loans, and $4.4 billion on its consumer loans, mostly in respect of credit card debt. That reflects the surge in corporate bankruptcies and individual unemployment that followed the extreme lockdown measures imposed across the U.S. in the quarter - a pattern that's likely to be reflected in all the earnings reports of the nation's banks in the next couple of weeks.
The charge against consumer loans pushed JPMorgan's main street operations to a loss of $176 million in the quarter, with net revenue falling 26% as the Federal Reserve's lower interest rates compressed deposit margins.
The results were, however, rescued by a strong performance from the markets division, where revenue rose 77% from a year earlier. Investment banking revenue also grew 46%, allowing the corporate and investment bank as a whole to post a 33% rise in revenue and $5.46 billion of profit.
JPMorgan shares are down 29% from the beginning of the year, and down 31% from their 52-week high of $141.10 set on January 2. They are under-performing the Dow Jones which is down 8.6% from the start of the year.
JPMorgan follows other major Financial sector earnings this month
JPMorgan's report follows an earnings miss by Commerce Bancshares on Tuesday, who reported EPS of $0.51 on revenue of $327.3 million (NYSE:MMM), compared to forecast EPS of $0.55 on revenue of $326.62 million.
Jefferies Financial had beat expectations on June 29 with second-quarter EPS of $0.16 on revenue of $1.15B, compared to forecasts for a net loss of 3c a share on revenue of $844.3 million.
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