JP Morgan Chase & Co, which is the largest lender in the US by assets, reported its profits for the first quarter of 2016. The Wall Street analysts had estimated far low profits for the bank given the fact that its trading revenue had declined.
JP Morgan’s net income dropped by 6.7% and came down to $5.52 billion from $5.91 billion in one year. According to the 29 analysts that estimated the drop in revenue, their estimate was $1.25 per share, but the company managed it at $1.41.
Wall Street has a keen interest in JP Morgan’s report because they are the first to report their revenues and profits for this quarter and their reports also show how much money is earned by the biggest banks in the country from advertising and trading.
Many firms claimed that global growth concerns and market turbulence played a role in deterring clients from trading. Since the financial crisis in 2008, this has been the worst start for the industry for this year. Analysts estimated that the revenues would fall to $23.8 billion, but the firm maintained it at $24.1 billion. According to JP Morgan, non-interest expenses saw a decline of 7 percent for legal costs, trading compensation and lower investment banking.
Revenue for tangible common equity also saw a decline. From the previous year, it went from 14 percent to 12 percent. At around 7.46 am on Wednesday, JP Morgan rose 2.9 percent. Analysts were warned in February this year that the market revenue would be down by 20 percent. The revenue for fixed income trading fell 13 percent and came down to $3.6 billion. It beat the estimate of Richard Ramsden, the analyst of Goldman Sachs Group who believed the revenue would come down to $3.24 billion.
The revenue for equity trading was down by 5 percent and came down to $1.58 billion. According to seven analysts, the estimated drop was $1.35 billion. The net income coming from the community and consumer banking which is run by Gordon Smith went up by 12 percent and was $2.49 billion.
The revenue rose by 4 percent and came up to $11.1 billion as opposed to the estimated revenue of $10.7 billion by analysts Burnell. Profits from asset management that is run by Mary Erdoes rose to 17 percent. The expenses for the division dropped by 5 percent and came down to $2.1 billion due to compensation related to lower performance. Commercial banking that is run by Doug Petno reported a decline in profit by 17 percent.
The second largest bank and the top mortgage bank of the country, Bank of America Corp and Wells Fargo will be announcing their results on Thursday. Citigroup will make their announcement on Friday and Goldman Sachs and Morgan Stanley will put up their reports the following week.