JPMorgan Chase’s quarterly profit more than doubled but revenues fell as lower interest rates, lacklustre loan demand and a slowdown in trading activity from the height of the pandemic took a toll.
The bank’s overall revenue fell 8 per cent from the second quarter of 2020 to $30.4bn while profit rose from $4.7bn last year to $11.9bn, as the release of billions of dollars set aside to cover potential loan losses offset the trading slowdown.
Deposits continued to flood into the bank, rising 23 per cent on average, while its loan book remained stagnant at $1tn. Loans rose slightly in the final weeks of the quarter as credit card spending normalised, but “unusally high” payment rates could prevent the bank from earning interest on those balances, the bank said.
The lending environment is unlikely to improve this year, the new chief financial officer Jeremy Barnum told reporters on a call.
“In terms of overall loan growth and importantly the growth of interest-bearing balances, that’s going to be a little bit of a slough through the rest of this year,” he said.
Net interest income, which measures the difference between what banks pay on deposits and what they earn on loans and other assets, had been weighed down by government stimulus and a flattening yield curve. That metric fell 8 per cent in the most recent quarter.
Loans at JPMorgan’s consumer and community banking division were down 3 per cent on the back of higher prepayments in mortgages and lower balances at its credit card business, Jamie Dimon, chief executive, said.
JPMorgan’s trading arm, where earnings ballooned during the pandemic on the back of extreme market swings, reported revenue of $6.8bn, down 30 per cent from a year ago, led by a 44 per cent decline in fixed-income trading.
Profits were flattered by the release of $3bn that had been set aside to cover potential losses triggered by the economic fallout from the Covid-19 pandemic, which have not materialised. Dimon said that benefit was not “core or recurring.”
Overall, the largest US bank reported earnings of $3.78 per share, up from $1.38 per share in the same period last year. Analysts had forecast earnings of $3.13 per share, according to a consensus data compiled by Bloomberg. Excluding the impact of the reserve releases, earnings were roughly $3.05 per share.
The investment banking division, which has been buoyed by a surge in mergers and acquisitions, was a bright spot. Fees rose 25 per cent to an all-time high of $3.6bn and ahead of forecasts for $3.1bn.
Shares initially fell more than 1 per cent during pre-market trading but pared early losses to trade down 0.5 per cent at $157.20.