July 12, 2013

JPMorgan, Wells Fargo Beat Estimates for Q2

Though positive, sales growth at the big banks doesn’t keep pace with profit expansion

JPMorgan Chase CEO Jamie Dimon testifying in Congress last year. (Photo: AP) JPMorgan Chase CEO Jamie Dimon testifying in Congress last year. (Photo: AP)

Earnings season for the financial sector had a good start early Friday, with JPMorgan Chase (JPM) and Wells Fargo (WFC) both beating analysts’ estimates for second-quarter earnings by a wide margin.

JPMorgan Chase says its profits rose 32% on strong results in investment banking business, credit-card operations and mortgage lending. Net earnings were $6.5 billion, or $1.60 a share, on revenue of nearly $26 billion versus earnings of just under $5.0 billion, or $1.21 per share, on sales of about $22 billion a year earlier. (This represents year-over-year sales growth of about 18%.)

“Our earnings reflected strong growth across our businesses,” Jamie Dimon, the bank’s chief executive, said in a statement on Friday.

Wells Fargo, currently the biggest U.S. mortgage lender, saw its second-quarter profit grow roughly 20%: Net income rose to $5.52 billion, or $0.98, from $4.62 billion, or $0.82. Revenue, though, expanded just 0.5% to $21.4 billion from $21.3 billion.

"Wells Fargo again demonstrated an ability to grow during a dynamic economic and interest-rate environment," the bank's chairman and CEO, John Stumpf, said in a statement.

Bank of America-Merrill Lynch (BAC) plans to report earnings on Wednesday, while Morgan Stanley is set to report its second-quarter results on Thursday.

As measured by the Market Vectors Bank and Brokerage ETF, which has sizeable positions in Wells, JPMorgan and BofA, the overall financial sector is up about 5% year to date and more than 30% in the last 12 months.

Advisor-Focused Businesses

JPMorgan says that its asset management unit had revenue of more than $2.73 billion in the second quarter, up from $2.36 billion a year ago and $2.65 billion in the first quarter. Net income for the group was about $500 million in the most recent period — up from $487 million in March and $391 million in June 2012.

Private banking activities brought in sales of $1.5 billion, up 11% from last year. The retail side had revenues of $654 million, a 35% jump from last year, while the institutional side grew sales 9% year over year to $588 million.

Overall client assets stand at $2.2 trillion, a 10% jump from Q2’12; client assets under management are $1.5 trillion. Overall net flows for the past year were $67 billion, including $3 billion in the most recent period. Plus, the unit has had 17 quarters of positive flows, JPMorgan says.

This business includes 2,804 financial advisors as of June 30, an increase from 2,797 as of March 30 and 2,739 as of June 30, 2012. Across the firm, there are 5,828 advisors vs. 5,795 in the prior quarter and 5,814 a year ago.

Wells Fargo’s Wealth, Brokerage and Retirement unit reported revenue of close to $3.3 billion, up 10% from the year-ago period and 2% from the prior quarter, partly due to higher asset-based fees, the bank says.

Net income rose 27% from last year and 29% from last quarter to $434 million.

The retail brokerage reported client assets of $1.3 trillion, up 9% from last year. Managed accounts grew 19% to $52 billion, “driven by strong net flows and market performance,” the bank notes.

Wells’ wealth-management group said it had client assets of $203 billion as of June 30, up 3% from the prior year. Also, retirement IRA assets grew 12% year over year to $315 billion, while institutional retirement plan assets expanded 11% to $277 billion.

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