JPMorgan beats profit estimates but shows signs of pressure

Published: Updated:

JPMorgan Chase & Co. reported a quarterly profit that beat estimates on Tuesday as higher interest income and consumer lending offset lower activity at its trading desks.

But even as the biggest US bank reported record earnings, there were warning signs across Wall Street that the playing field is beginning to tilt against the financial industry.

Like Citigroup on Monday and Wells Fargo & Co. on Tuesday, JPMorgan reported its net interest margin declined to 2.49 percent from 2.57 percent a year ago, as deposit rates and the rate the bank pays for other borrowings both rose.

JPMorgan also lowered its outlook for net interest income to “about $57.5 billion” in 2019 from the $58 billion to $60 billion projection executives gave in February.

While Chief Executive Officer Jamie Dimon maintained a bullish outlook about the US economy as a whole, he conceded that uncertainties relating to global trade, which tend to impact trading volumes, were a drag.

“The consumer in the United States is doing fine,” Dimon said on a conference call. “Business sentiment is a little bit worse, mostly driven by the trade war. But...I wouldn’t get too pessimistic.”

Average loans rose 2 percent, driven largely by JPMorgan’s consumer bank, Chase, which reported credit card loans were up 2 percent and credit card sales surged 11 percent. The cost of handling that credit was flat.

Overall income from the consumer and community banking, JPMorgan’s largest business, rose 22 percent to $4.17 billion, which offset declines across other businesses.

Total net interest income, the difference between what banks pay on deposits and earn on loans, rose 7 percent to $14.40 billion.

Net income climbed 16 percent to $9.65 billion as a tax gain and higher net interest income overshadowed lower activity on its trading desks. Excluding the tax gain, it earned $2.59 per share. Net revenue rose 4 percent to $29.57 billion.

Return on tangible common equity, a key profit measure for how well it uses shareholder money, rose to 20 percent, up from 19 percent in the first quarter and higher than the bank’s 17 percent target.

Analysts were expecting earnings of $2.50 per share on revenue of $28.90 billion, according to IBES data from Refinitiv.