JPMorgan Chase & Co’s quarterly profit fell short of Wall Street expectations yesterday as lower revenue from investment banking ate into gains from stock trading and higher interest rates.
Investment banking revenue fell 7% as it underwrote fewer debt and equity offerings, a dark spot in an otherwise strong quarterly report.
Shares of the largest US bank by assets were down nearly 1%, paring early gains.
The stock has risen 33% in the past 12 months. JPMorgan gained from a strengthening economy and higher interest rates that lifted lending revenue more than the its cost of money.
Its equity markets business had a robust quarter, driven by a surge in volatility in global markets. Overall, profit rose 35% to an all-time high, while revenue was up 10%.
“We are pleased with the firm’s performance this quarter, with all of our businesses showing continued and broad strength and an overall environment that remains supportive,” chief financial officer Marianne Lake said on a call.
She expects tax cuts and higher interest rates to provide even more of a “tailwind” to profits going forward. Markets revenue rose 7%, excluding special items, on a 26% jump in equity trading.
Net interest income rose 9% to $13.5bn as the rates it received for loans rose faster than its costs of funds.
The bank’s net income rose 35% to $8.71bn in the quarter.
Excluding items, it earned $2.26 per share, missing average estimate of $2.28, according to Thomson Reuters I/B/E/S. Net revenue was $28.52bn, beating the average estimate of $27.68bn. Return on tangible common equity, a performance measure, was 19%, compared with 13% a year earlier.
US regional lender PNC Financial Services Group yesterday forecast modest loan growth and a rise in loan loss provision for the second quarter, sending its shares down more than 4%.
After PNC reported first-quarter profit broadly in line with analysts’ estimates, the guidance by chief financial officer Robert Rilley pushed shares to a more than three-month low. The broader market and the S&P 500 financial sector index were both lower, weighed down by quarterly results from JPMorgan Chase Co, Wells Fargo & Co and Citigroup.
Chief executive Bill Demchak said on a post-earnings call he expects real estate markets to tighten, leading to slower loan growth in the business.
“The combination of rising business optimism and lower corporate tax rates has raised the bar in terms of loan growth expectations,” Edward Jones analyst Kyle Sander said. PNC Financial forecast second-quarter provision for loan losses to be between $100mn and $150mn.
This follows a 4.5% rise in loan loss provision to $92mn in the first quarter.
The higher provision and a 5% jump in expenses offset gains from higher interest income and pushed PNC Financial to report an in-line profit for the three months ended March 31.
The Pittsburgh-based bank, among the United States’ largest local lenders by assets, had beaten analysts’ profit estimates for the past seven quarters.
The company reported earnings per share of $2.43, in line with analysts’ average estimate, according to Thomson Reuters I/B/E/S. Net interest income rose 9% to $2.37bn.—Agencies