J.P. Morgan Reports Strong Earnings but Trims Outlook -- 6th Update

By Emily GlazerFeaturesDow Jones Newswires

J.P. Morgan Chase & Co. posted a record profit for the second quarter as a lending boost in both its consumer and commercial businesses offset weaker trading results.

But the bank trimmed its full-year outlook for growth in lending and net interest income. That caused J.P. Morgan's shares to fall, despite it posting net income of $7.03 billion, up 13% from a year earlier.

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At the same time, Chief Executive James Dimon expressed continued frustration with a failure in the U.S. to enact policy changes in regard to regulation, taxation, infrastructure spending and education, among others.

That, he said, was holding back the U.S. economy. "It's hurting the average American that we don't have these right policies," Mr. Dimon said on a call with analysts. "We have become one of the most bureaucratic, confusing, litigious societies on the planet. It's almost an embarrassment to be an American citizen traveling around the world and listening to the stupid shit we have to deal with in this country.

"We have to get our act together," he added.

Despite this, J.P. Morgan continued to grow revenue, which was rose 4.7% from a year ago to $26.41 billion. That topped analyst expectations of $24.96 billion.

Return on equity, a measure of profitability, was 12% in the second quarter compared with 10% a year earlier.

Earnings per share were $1.82. Those were boosted by a legal benefit of $406 million after taxes related to a settlement involving Washington Mutual, which the bank bought during the financial crisis. That helped boost earnings per share by 11 cents. Absent that, the bank would have posted $1.71 a share in earnings. That, though, was still above expectations for $1.58, according to analysts polled by Thomson Reuters.

Total loans grew 4.1% from a year earlier to about $908.77 billion. Net interest income rose 7.6% to $12.21 billion.

Finance chief Marianne Lake trimmed forecasts for growth in both these areas, however. She said that loan growth, previously forecast at 10%, was likely to come in at 8% for the year as a whole. Net interest income is now expected to grow by $4 billion, Ms. Lake said, down from earlier guidance of $4.5 billion.

One area of weakness in the bank's results came from trading, which was hampered by a lack of volatility and customer activity. Trading revenue decreased by 14% to $4.8 billion.

The performance was dragged down by 19% decline in fixed-income trading compared with the prior-year period.

The results, though, were largely in line with Ms. Lake's comments at an investor conference in May that trading at that point was down by about 15% from a year ago. She said Friday that it is too early to comment on July trading.

While trading was weak, investment-banking activity helped bolster overall results for J.P. Morgan's corporate and investment banking business. Profit at this unit increased 8.7% from a year ago to $2.71 billion. Advisory revenue rose 7.9%, while equity underwriting revenue jumped 29%.

Among J.P. Morgan's other businesses, the commercial bank earned $902 million, a 30% increase from the year-earlier quarter. The bank's asset-management unit reported a profit of $624 million, up 20%. Both were record profits for those businesses.

Conditions in the consumer bank were more challenging. Profits fell to $2.22 billion in the quarter, down from $2.66 billion a year ago.

J.P. Morgan extended $23.9 billion in mortgages in the quarter, a decrease of 4.4% from the $25 billion the bank extended a year earlier. Revenue in the bank's mortgage division, one of the largest in the U.S. by volume, was $1.43 billion, down 26% from a year ago.

Ms. Lake said the mortgage market is smaller and more competitive, and "fewer loans have met our hurdle rate."

Overall, J.P. Morgan set aside $1.22 billion in the second quarter to cover loans that could potentially turn bad in the future. That compares with $1.4 billion in the second quarter of 2016 and $1.32 billion in the first quarter of 2017.

The bank lost $1.2 billion to loan defaults, or 0.56% of its overall portfolio, compared with a 0.79% charge-off rate in the first quarter of 2017.

The bank's provision for credit losses fell to $1.22 billion from $1.4 billion a year earlier.

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

July 14, 2017 11:50 ET (15:50 GMT)