JPMorgan posted lower profits of $5 billion, down 8.7% from a year ago, due largely to the chief investment office’s (CIO) trading losses of $4.4 billion in the quarter, according to JPMorgan’s Q2 earnings report. Also on Friday, JPMorgan announced plans to claw back compensation from CIO traders involved in the losses. But considering the bank’s disastrous London Whale trading troubles, JPM’s $1.21 earnings per share versus last year’s $1.27 cheered investors and analysts, who had expected per-share earnings of only $0.70.
Wells, meanwhile, reported that Q2 profits rose 17% to $4.6 billion from $3.9 billion a year ago. Earnings stood at $0.82 per share, a penny higher than analysts’ expectations.
The bank’s massive mortgage business, with $131 billion of originations in Q2 versus $129 billion in Q1 and $64 billion a year ago, was clearly unhindered by a $175 million settlement with the Justice Department for Wells’ alleged discrimination against minority homeowners between 2004 and 2009. “Litigation accruals” related to that settlement, announced Thursday, were including in the $524 million operating loss. The bank had an operating loss of $477 million in the first quarter.
JPM Stock Sees Relief Trade
In early afternoon trading, JPMorgan stock was up 5.92% at $36.06 versus Thursday’s close of $34.04. WFC also was up, by 3.23%, to trade at $33.91 versus Thursday’s close of $32.85.
“In general, we’re seeing some strength come through in the stock prices,” said Shannon Stemm, a finance sector analyst with Edward Jones, in a phone interview after the earnings releases. “It’s a mixed picture with JPM, driven more by relief, and Wells is driven more by underlying strength with the company’s earnings consistency.”
Stemm was pleased with the steps that JPMorgan has taken to address “what’s been a disappointing situation,” and said the $4.4 billion loss was large but manageable given the large size of JPMorgan’s balance sheet.
Turning to the Wells settlement, she said, “It’s always good to see lawsuits and legal uncertainty put behind a company. As far as that lawsuit impacting the overall mortgage activity at Wells, no, you haven’t seen that and you’re not going to see that going forward.”
J.P. Morgan Asset Management Down 10.9%; Wells Wealth Unit Up 1.8%