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Portfolio > Economy & Markets > Fixed Income

JPMorgan Finds Goldilocks Moment in First-Quarter Volatility

By Zeke Faux

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JPMorgan CEO Jamie Dimon (Photo: AP)

For JPMorgan Chase & Co., last quarter’s volatility appears to have been just right.

Revenue and profit for the first three months of 2018 rose to all-time highs, the bank said Friday, spurred by record results from stock trading. Revenue jumped at nine of the bank’s 11 largest business lines, according to a statement.

Bankers who last year griped about the lack of volatility suddenly had the opposite complaint: Wild market swings were threatening to push wary investors to the sidelines. But all told, the first-quarter mix featured enough activity to boost revenue.

Traders benefited as interest rates rose and stocks at one point had their worst single-day plunge in seven years. The results bode well for the rest of Wall Street, including Citigroup Inc., which reports earnings later Friday.

Equities trading contributed $2.02 billion of revenue, a 26 percent gain that beat analysts’ estimates. Bond-trading revenue rose 8 percent in the quarter to $4.55 billion, while the bank said fixed-income revenue was flat excluding one-time gains.

Net interest income jumped 9 percent to $13.5 billion after the Federal Reserve raised its benchmark rate four times since the start of last year.

JPMorgan said it expects net interest income to be as much as $55 billion for the year, sticking with the company’s previous full-year target. Banks are benefiting from rising interest rates as they charge borrowers more while keeping their deposit rates low.

The tax rate for the quarter was 18 percent, down from 23 percent a year earlier, as the Trump administration’s tax overhaul took hold. JPMorgan said its effective tax rate will be about 20 percent this year, compared with a January estimate of about 19 percent.

Fed Rates

In February, the bank forecast that higher U.S. interest rates engineered by the Federal Reserve and lower corporate taxes would translate into about $7 billion more in pretax profit in coming years.

Based on estimates released in February, JPMorgan’s profits for all of this year may be a third higher than 2017, thanks in part to new corporate tax cuts. Chief Executive Officer Jamie Dimon is planning to invest some of that in technology, a new headquarters in midtown Manhattan and 400 new branches.

“2018 is off to a good start with our businesses performing well across the board,” Dimon said in the statement.

JPMorgan shares, which are up 5.3 percent this year, dropped 0.7 percent to $112.60 at 9:38 a.m. in New York. The KBW Index fell 0.3 percent.

Here’s a summary of JPMorgan’s results:

  • Quarterly profit rose to $8.7 billion, or $2.37 a share, from $6.45 billion, or $1.65, a year earlier.
  • Revenue rose 10 percent to $28.5 billion, while expenses increased 5 percent to $16.1 billion.
  • Investment-banking fees declined 10 percent to $1.7 billion.

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