JPMorgan net income rises 13% to $7.03bn; shares dip

JPMorgan Chase & Co reported a better-than-expected quarterly profit yesterday due to strong loan growth and higher interest rates, but said net interest income for the year would be lower than expected, sending its shares down about 2%. The bank’s borrowing business increased across residential mortgages, business loans, credit cards, and even auto loans, an area where some lenders have been pulling back.However, on a call with analysts, chief financial officer Marianne Lake said net interest income for the full year would increase by $4bn, rather than a $4.5bn estimate given in April.This is due to mortgage adjustments and a change in the alignment of interest rates, Lake said.Overall, JPMorgan’s net income rose 13% to $7.03bn, or $1.82 per share, from $6.2bn, or $1.55 per share, in the year-ago quarter.This was driven by JPMorgan’s average core loan book, which grew 8% in the second quarter compared with the same period a year earlier.Higher interest rates helped JPMorgan earn more money on these loans.Excluding a gain from a legal settlement, the bank earned $1.71 per share, topping the average analyst estimate of $1.58, according to Thomson Reuters I/B/E/S.The Federal Reserve lifted interest rates for the second time this year in June.Rising rates are usually good for banks, allowing them to increase how much they charge for loans faster than they boost how much they pay for deposits.JPMorgan executives have told investors to expect credit card loss rates to go up as the company makes more loans.On newer card accounts, the bank sees charge-off rates of about 4.5%, Gordon Smith, head of consumer banking, said at an investor conference in June.Trading revenue was a dark spot for JPMorgan as volatility hit multi-year lows.But executives across Wall Street have been warning investors to look for declines because the year-ago quarter benefited from a surge in trading around the UK’s Brexit vote.JPMorgan’s markets revenue dropped 14% to $3.22bn, mostly due to fixed income trading.CitigroupCitigroup reported a quarterly profit that beat analysts’ estimates as trading revenue held up better than the company’s forecast and loans grew.The lender said markets revenue declined about 7% in the second quarter from a year earlier, smaller than the 12%.