J.P Morgan quarterly profit rises

J.P. Morgan Chase & Co posted a higher-than-expected jump in second-quarter profit as it wrote off fewer bad mortgages and credit card loans. The second-largest US bank managed to make more loans during the quarter than in the first quarter and added staff, signs that bright spots are emerging in a sector long plagued by credit losses and questions about future profitability. The bank's shares rose in premarket trading.
"For this company to put up these kinds of numbers, given all the pressures the industry is facing, is phenomenal," said Richard Bove, a bank analyst with Rochdale Securities.
J.P. Morgan is the first major US bank to post quarterly results, and its performance gives hints about how other banks fared in the period. While there was positive news from the bank, it still faces headwinds. It said it expects big expenses in mortgages as the housing crisis continues to saddle banks with high costs. Foreclosures could take another 12 to 18 months to start declining, Chief Executive Jamie Dimon said on a conference call with reporters.
Bond trading revenue, long a profit engine for many banks on Wall Street, declined from the first quarter. J.P. Morgan earned $5.43 billion, or $1.27 a share, in the second quarter, beating the average Wall Street estimate by 6 cents a share, according to Thomson Reuters I/B/E/S.
The results were up from year-earlier earnings of $4.8 billion, or $1.09 a share. J.P. Morgan's loan book grew to $689.74 billion at the end of the quarter from $686 billion at the end of March as increased business lending offset a 2 percent decline in consumer lending. Compared with a year earlier, total loans were down 1 percent. Average loans fell to $686.11 billion from $688.13 billion in the first quarter.
Shrinking loan books and low interest rates since 2008 have made it difficult for banks to post profits, or increase them. A large part of earnings over the past year has come from reversing allowances the banks made earlier for bad loans. Many analysts are hoping banks will start to post loan growth in the coming quarters, which would be a sign of sustainable increases in profits.
J.P. Morgan reduced the expense it recorded for credit costs to $1.81 billion in the second quarter from $3.36 billion a year earlier. However, that was up from $1.17 billion in the 2011 first quarter. J.P. Morgan shares were up 2.5 percent to $40.60 in premarket trading Thursday following the results. Stock futures edged higher as the bank's strong earnings offset concern about the US budget deficit talks and Europe's sovereign debt crisis.