JPMorgan Profits Rise 24% Despite Trading Dip

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October 12, 2018 11:27 am Published by
A branch of JPMorgan Chase in New York. The bank reported its quarterly results on Friday.
A branch of JPMorgan Chase in New York. The bank reported its quarterly results on Friday. Photo: Richard B. Levine/Zuma Press

 JPM -3.00% JPMorgan Chase & Co. said Friday that third-quarter profit jumped 24% as the bank’s consumer business helped it overcome weaker trading.

Shares rose about 1% in premarket trading after the results were announced.

The bank reported a profit of $8.38 billion, or $2.34 a share. Analysts polled by Refinitiv had expected earnings of $2.25 a share.

JPMorgan’s trading revenues decreased 2% to $4.4 billion from $4.5 billion a year earlier. Fixed-income trading revenue fell 10%, while equities trading revenue rose 17%.

The boost from still low – but rising — interest rates is likely to be a major focus for investors. Though an increase in rates can help the profitability of big consumer lenders like JPMorgan, they can also drag down mortgage banking revenue and force banks to pay more to depositors.

JPMorgan extended $22.5 billion in mortgages in the quarter, a decrease of 16% from the $26.9 billion the bank extended in the third quarter a year ago. Revenue in the bank’s home lending division, one of the largest in the U.S. by volume, was $1.31 billion, down 16% from the $1.56 billion it reported in the year-earlier period.

The Wall Street Journal reported earlier this month that JPMorgan is laying off around 400 mortgage employees to help cope with a slowdown in the market.

In the consumer bank, profits rose 60% to $4.09 billion, compared with $2.55 billion in the third quarter a year ago.

Overall profit at the corporate and investment bank was $2.62 billion, a 3% increase from $2.55 billion in the same period last year. JPMorgan’s commercial bank earned $1.09 billion, a 24% increase from the $881 million it earned in the year-ago quarter, and the bank’s asset and wealth management unit reported profits of $724 million, compared with $674 million in the third quarter of 2017.

JPMorgan set aside $948 million in the third quarter to cover loans that could potentially turn bad in the future. That compares with $1.2 billion in the second quarter of 2018 and $1.45 billion in the third quarter of 2017. The bank lost $1 billion to loan defaults, or 0.45% of its overall portfolio, compared with a 0.58% charge-off rate in the third quarter of 2017.

Costs increased 7% to $15.62 billion from $14.57 billion a year earlier. At a September conference, Chief Financial Officer Marianne Lake said the bank’s 2018 expenses likely will be closer to $63.5 billion, up from $63 billion that was shared at its annual investor day presentation in February. The rise is largely revenue related, tied to matters such as transaction costs and brokerage clearing in addition to performance incentives, she said in September.

Legal costs totaled $20 million in the third quarter, compared with nonmaterial costs in the second quarter of 2018 and a benefit of $107 million a year earlier.

Return on equity, a key measure of profitability, was 14% in the third quarter compared with 11% a year ago.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Emily Glazer at emily.glazer@wsj.com

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