JPMorgan profit rises as fixed-income trading rebounds

JPMorgan Chase & Co, the biggest US bank by assets, reported a better-than-expected quarterly profit after a decision by the Swiss central bank to remove a cap on the franc shocked markets and spurred trading in currencies and bonds. The bank’s strong results bolstered Chief Executive Jamie Dimon’s argument that size and diversification are advantages, not a reason to break up the bank. Some analysts have suggested JPMorgan should be broken up to reduce capital requirements and complexity. JPMorgan’s revenue from trading fixed income, currencies and commodities (FICC) increases by 5% to $4.07bn in the first quarter. The strong investment banking results helped boost JPMorgan’s shares as much as 2.5% to $63.61 yesterday. Chief Financial Officer Marianne Lake told reporters it was too soon to say whether trading activity would hold up in the current quarter, although volumes seemed to be a bit lower. JPMorgan’s investment bank is the world’s biggest by revenue, according to research firm Coalition. Its revenue rose 8.4% to $9.58bn in the quarter. But the unit has been under pressure to cut costs as clients have reduced trading since the financial crisis and regulators have demanded that big banks take fewer risks, hold more capital and improve controls. JPMorgan was the first big US bank to report for the quarter. Overall results are expected to show that trading, debt underwriting and mortgage refinancing were strong even as low interest rates cut into profitability on loans. JPMorgan’s home loans, including refinancing, jumped 45% $24.7bn as mortgage rates hovered near two-year lows. Net income rose to $5.91bn, or $1.45 per share, from $5.27bn, or $1.28 per share, a year earlier. Analysts on average had expected earnings of $1.40 per share, according to Thomson Reuters I/B/E/S. The results included an after-tax charge of $487mn for legal expenses. The bank has said its legal troubles should normalize by 2016. JPMorgan’s revenue increased 3.7% to $24.07bn while expenses, adjusted for legal costs, fell by $402mn to $14.2bn. Money set aside to cover bad loans rose 12.8% to $959mn. The bank’s interest margin, a key measure of profitability, fell to 2.07% from 2.20, reflecting low interest rates.