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Tuesday, August 3, 2021

JPMorgan Profit More Than Doubles, but Revenue Falls

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JPMorgan Chase

JPM 1.43%

& Co. on Tuesday said second-quarter profit soared compared with a year ago, when the bank was stockpiling funds to prepare for a painful recession.

The nation’s biggest bank posted a profit of $11.95 billion, or $3.78 per share, compared with $4.69 billion or $1.38 per share a year ago. That beat the expectations of analysts, who had predicted $3.20 per share.

Yet revenue fell 8% to $30.48 billion from $33.08 billion a year ago, the result of depressed lending margins and lower trading revenue. Analysts had expected $29.97 billion in revenue, according to FactSet.

The divergence between profit and revenue is largely due to the extraordinary conditions of the second quarter of 2020, when the coronavirus pandemic appeared poised to decimate the economy. Then, JPMorgan set aside $10.47 billion to prepare for a wave of loan defaults. This quarter, the bank continued to free up pandemic loan-loss reserves, releasing another $3 billion and boosting its bottom line.

The second quarter will likely prove to be an in-between period for big banks like JPMorgan. Businesses that boomed throughout the pandemic, especially trading and investment banking, are slowing down from record paces. Corporate clients that last year nervously rushed to raise money are now flush with cash. Last year’s market chaos, which can be ideal for trading, has quieted now that the U.S. has gotten the pandemic under control.

Revenue fell 19% in JPMorgan’s corporate and investment bank and was up 3% in its consumer bank.

Loan balances grew 3% but with interest rates still near zero, the bank’s lending profits fell again.

Net interest income, the amount the bank collects in interest on loans minus what it pays for deposits, fell 8%.

Net charge-offs, or loans the bank no longer expects to be repaid, were down from a year ago.

JPMorgan shares are up 24% this year and hit an all-time high in June. The stock was down 1% premarket on Tuesday. Investors have broadly bet on the banking industry for exposure to the economic recovery.

In the corporate and investment bank, trading revenue was $6.79 billion, falling 30% from a blockbuster quarter a year ago but better than executives had forecast. Investment banking fees rose 25%. Stock underwriting revenue rose 9%, and debt underwriting rose 26%. Fees from advising on mergers and acquisitions rose 52%.

Spending on JPMorgan consumer credit cards increased 51% in the quarter, but borrowers are still paying down card debt quickly. The bank said spending on both credit cards and debit cards surpassed pre-pandemic levels, including in categories like travel and entertainment.

Investors and analysts are eagerly reading signs of a revival in loan growth, which they believe signals the next stage of the economic recovery.

The commercial bank posted a $1.42 billion profit, swinging from a loss on loan-loss reserves a year ago. The asset and wealth management unit’s profit rose 74% to $1.15 billion.

Write to David Benoit at david.benoit@wsj.com

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