March 24, 2023

DealBook: JPMorgan Quarterly Profit Rises 34%

Jamie Dimon, the chief of JPMorgan Chase.Yuri Gripas/ReutersJamie Dimon, the chief of JPMorgan Chase.

JPMorgan Chase on Friday reported a third-quarter profit of $5.7 billion, up 34 percent from a year ago, as the bank showed signs of strength in consumer and corporate lending.

The bank surpassed expectations with earnings of $1.40 a share, compared with $1.02 a year earlier. JPMorgan’s revenue rose to $25.9 billion, up 6 percent from 2011.

As the nation’s largest bank, JPMorgan is often considered a barometer of how rival institutions and the greater economy will fare. With growth across virtually all the bank’s core businesses, the earnings could bode well for the rest of the industry.

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In particular, JPMorgan’s earnings were buoyed by the mortgage business, which is benefiting from a variety of government initiatives. The company originated $47 billion of new home loans and refinancing, up 29 percent from the same period a year earlier. Earnings in the mortgage unit increased by 57 percent.

“We believe the housing market has turned the corner,” said Jamie Dimon, the bank’s chief executive, in a release.

Still, Mr. Dimon tempered expectations for the market. While emphasizing the growth in the bank’s mortgage business, he warned that defaults could continue, along with foreclosures. Mr. Dimon, who has been an outspoken critic of overreaching regulation from Washington, also noted that the housing market could rebound more quickly if lawmakers made certain moves.

“I would hope for America’s sake we start to fix the things that make the mortgage underwriting too tight,” Mr. Dimon said on a conference call with reporters.

Throughout its core lending businesses, JPMorgan showed signs of strength. The commercial banking group reported record revenue. The volume of credit card sales jumped 11 percent over the previous year, bolstering the broader unit. The card services and auto business posted profits of $954 million, up 12 percent.

With the improving credit environment, JPMorgan set aside less money to cover potential losses. In the mortgage banking business, the bank cut the amount of reserves by $900 million. Across the bank, JPMorgan set aside $1.79 billion of such funds, compared with $2.41 billion a year earlier.

JPMorgan is also cleaning up a bungled trade, which has been the focus of investors and regulators for months. The bank disclosed in May that its chief investment office in London had lost billions of dollars in a bet on credit derivatives.

In the second quarter, the bank transferred the remaining credit bets in the chief investment office to its investment banking unit. On Friday, JPMorgan said it “effectively closed” out its derivative position, which was made by the so-called London Whale. With its $449 million loss on the portfolio, the total tally of losses on the trade are around $6.25 billion.

During the conference call, Mr. Dimon played down the prospect of continued losses on its bad bets. “Synthetic credit is a sideshow,” Mr. Dimon said.

Since announcing the loss in May, JPMorgan has been dogged by questions related to the losses, and several high-profile employees have lost their jobs. In the latest challenge for the bank, federal authorities are building criminal cases related to the trading loss, examining calls where JPMorgan employees talked about how to value the bets. The Securities and Exchange Commission is also investigating the trading losses.

In its bid to reassure skittish investors, the bank has broadly reshuffled its executive ranks. For example, Douglas Braunstein, the bank’s chief financial officer since 2010, is expected to give up his position, but remain at the company.

EARNINGS CALENDAR A boom in mortgages is expected to benefit banks’ third quarter profits.

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