JPMorgan, Goldman Beat Estimates: Q2 Earnings

Bond trading revenue fell less than expected; CEO Dimon's health issues overshadow JPMorgan results

Analyst say there's a "Jamie premium" built into JPMorgan's stock. (Photo: AP) Analyst say there's a "Jamie premium" built into JPMorgan's stock. (Photo: AP)

JPMorgan Chase & Co., the biggest U.S. bank, posted second-quarter profit that beat estimates as fixed-income trading revenue fell less than analysts expected. The stock climbed the most in eight months.

Net income declined 7.9% to $5.99 billion, or $1.46 a share, from $6.5 billion, or $1.60, a year earlier, the New York-based firm said today in a statement. Earnings excluding some items were $1.59 a share, topping the $1.31 average estimate of 29 analysts surveyed by Bloomberg. Revenue slid 2.3% to $25.4 billion from a year earlier.

Quarterly results were overshadowed by questions about the health of Chief Executive Officer Jamie Dimon, 58, who said July 1 that he would soon undergo radiation and chemotherapy for throat cancer. While Dimon reiterated today that his prognosis is excellent and that he’ll be able to work during eight weeks of treatment, the disclosure raised fresh questions about succession planning at the bank he’s run since 2006.

“There’s definitely a Jamie premium in this stock that would come out if the market believed he was going to make a transition,” said Marty Mosby, director of bank and equity strategies at Memphis, Tennessee-based broker-dealer Vining Sparks. “With someone as strong as Jamie, the trouble is that everybody else was part of a team who reported to him, and there’s not a clear second-in-command or frontrunner to take over.”

Shares Climb

JPMorgan climbed 3.9% to $58.46 at 9:32 a.m. in New York, the biggest intraday gain since November. The shares had declined 3.7% this year through yesterday, compared with the 2.8% advance of the 24-company KBW Bank Index.

“I feel great,” Dimon said today in a conference call with reporters. “I’m receiving the best treatment from the best doctors in the world.”

JPMorgan warned investors in May to expect Wall Street’s trading slump to continue through the second quarter, saying that fixed income and equities trading revenue could drop 20% from a year earlier. Fixed-income clients are making fewer bets amid low volatility and the Federal Reserve’s move to slow bond purchases, Daniel Pinto, 51, JPMorgan’s investment banking chief, said that month.

There were encouraging signs toward the end of the second quarter, including an improvement in “some markets activity,” Dimon said in today’s statement. While client activity jumped in June, it didn’t carry over into July, Chief Financial Officer Marianne Lake said on the media call.

Goldman Sachs

Fixed-income trading revenue fell 15% from a year earlier to $3.5 billion, beating the $3.14 billion average of analysts’ estimates compiled by Bloomberg. Equity-trading revenue dropped 10% to $1.2 billion on lower derivatives sales, matching the analysts’ estimates.

Goldman Sachs Group Inc. also posted a profit today that beat analysts’ estimates as fixed-income revenue fell less than many analysts predicted and investment-banking fees climbed. Net income at the New York-based firm rose 5% to $2.04 billion and revenue rose 6% to $9.13 billion.

JPMorgan’s total revenue of $25.4 billion surpassed the $23.9 billion average estimate of analysts with better-than- predicted results in trading and investment banking.

Investment banks may have to wait until 2016 before a significant improvement, Pinto told investors in May. Compensation also will decline if results fail to rebound, and the firm may eventually cut jobs, Lake said last month.

Wells Fargo & Co., the most valuable U.S. bank, posted second-quarter profit last week that rose 3.8% on lower credit costs, while Citigroup Inc. said yesterday that net income fell 96% as the company agreed to pay $7 billion to resolve a mortgage-related probe. Bank of America Corp., the second-biggest U.S. lender by assets, is scheduled to report results tomorrow.

--With assistance from Michael J. Moore and Craig Giammona in New York.

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