JPMorgan Chase (JPM 92.38, -0.72) is lower by 0.8% despite beating earnings and revenue expectations. The banking giant reduced its net interest income guidance for the full year and its stock climbed more than 10.0% in the three months preceding today's earnings release, which helps explain today's lackluster showing.
JPMorgan Chase reported above-consensus second quarter earnings of $1.82 per share on a 4.6% year-over-year increase in revenue to $25.50 billion, which also exceeded estimates.
Average core loans grew 8.0% year-over-year firmwide while core loans in Corporate Client Banking increased 9.0% Corporate Client Banking average deposits increased 10.0% to $640 billion.
The bank reported a Tier 1 capital ratio of 12.5%, up from 11.9% one year ago and up slightly from 12.4% in the previous quarter.
Adjusted overhead ratio remained unchanged year-over-year, holding at 56.0%. Adjusted expense increased to $14.40 billion from $14.10 billion one year ago.
Net interest income grew 8.0% year-over-year to $12.50 billion. Rising rates and loan growth fueled the increase, which was partially offset by declines in Markets net interest income. Noninterest revenue grew 2.0% to $13.90 billion, thanks in part to a benefit related to a legal settlement in Corporate. Higher Banking revenue in the Corporate & Investment Bank, higher auto lease revenue, and higher revenue in Asset & Wealth Management also contributed to the increase.
In the Consumer & Community Banking segment, Consumer & Business Banking revenue rose 13.0% year-over-year to $5.23 billion, as strong deposit growth and margin expansion fueled the increase. Mortgage Banking revenue fell 26.0% to $1.40 billion, due to higher rates resulting in higher funding costs, lower MSR risk management revenue, and lower production margins. Card, Commerce Solutions & Auto revenue declined 3.0% to $4.75 billion. The year-over-year decline was due to $200 million of non-core items in the same quarter one year ago. Excluding those items, segment revenue would have grown 2.0%.
Provision for credit losses was reported at $1.40 billion, up $193 million year-over-year. Higher net charge-offs and higher reserve build caused the increase.
In the Corporate & Investment Bank segment, net revenue fell 3.0% year-over-year to $8.89 billion, due to lower market volatility. Net income grew 9.0% to $2.71 billion.
Looking ahead, the bank expects that net interest income for the fiscal year will total roughly $4 billion, which is down from expectations for net interest income of $4.50 billion. Adjusted expense for the fiscal year is expected to hit $58 billion. Average core loan growth is expected at about 8.0% for 2017.