JPMorgan Q2 Net Profit Surges 67%; Results Top Estimates

US investment bank JPMorgan Chase & Co. (JPM) reported Thursday a net profit for the second quarter that surged 67 percent from last year, boosted by continued growth across all its lines of business. Both adjusted earnings per share and revenues for the quarter topped analysts’ expectations.

In pre-market activity on the NYSE, JPM shares are trading at $153.11, up $4.24 or 2.85 percent.

“We reported another quarter of strong results, generating net income of $13.3 billion and an ROTCE of 23% after excluding a net after-tax gain of $1.8 billion relating to the First Republic transaction, as well as discretionary after-tax investment securities losses of $0.7 billion,” said Jamie Dimon, Chairman and CEO.

In early May, JPMorgan acquired substantial majority of assets and assumed certain liabilities of First Republic Bank following an auction by Federal regulators for the troubled lender. It did not assume First Republic’s corporate debt or preferred stock.

Net income for the quarter surged to $14.72 billion or $4.75 per share from $8.65 billion or $2.76 per share in the prior-year quarter. Net income was up 40 percent excluding First Republic. Excluding significant items, adjusted net income was $13.3 billion or $4.37 per share.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $3.99 per share for the quarter. Analysts’ estimates typically exclude special items.

The provision for credit losses was $2.9 billion. Excluding First Republic, the provision was $1.7 billion, reflecting net charge-offs of $1.4 billion and a net reserve build of $326 million.

Total net revenue on a reported basis grew 34 percent to $41.31 billion from last year. On a managed basis, net revenue was $42.40 billion, up 34 percent or up 21 percent excluding First Republic from the previous year. The Street expected revenues of $38.96 billion for the quarter.

Net interest income was $21.9 billion, up 44 percent or up 38 percent excluding First Republic, predominantly driven by higher rates, partially offset by lower deposit balances.

Non-interest revenue was $20.5 billion, up 25 percent or up 6 percent excluding First Republic, predominantly driven by higher CIB Markets noninterest revenue and the absence of certain losses in Payments in the prior year, partially offset by higher net investment securities losses in Corporate.

Noninterest expense was $20.8 billion, up 11 percent or up 8 percent excluding First Republic, driven by higher compensation expense, including front office hiring and wage inflation, as well as technology and marketing investments and higher legal expense.

Banking & Wealth Management net revenue was $10.94 billion, up 68 percent or up 59 percent excluding First Republic, predominantly driven by higher deposit margins on lower balances.

Card Services & Auto net revenue was $5.29 billion, up 5 percent, largely driven by higher Card Services net interest income on higher revolving balances, partially offset by lower auto operating lease income and card net interchange.

Banking revenue increased 29 percent to $4.24 billion, while markets & securities services revenue declined 5 percent to $8.28 billion from last year.

Looking ahead, Dimon added, “While we expect material capital changes with the finalization of Basel III and probable changes to come for bank liquidity, we will manage to any new requirements as we have demonstrated in the past; however, we caution that material regulatory changes would likely have real world consequences for markets and end users.”

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