JPMorgan Chase reported an 8 percent slide in second-quarter earnings on Tuesday, the latest sign that the bank is grappling with lackluster revenue from trading and a slowdown in mortgage lending.
Together, the challenges, broadly buffeting the banking industry, dampened profits at JPMorgan.
The net earnings of $25.3 billion, or $1.46 a share, exceeded below Wall Street analysts' expectations of $1.29 a share on revenue of $23.76 billion.
As the nation's largest bank, JPMorgan's earnings are always closely watched by analysts and investors looking to divine more about how the broader banking industry will fare.
Cementing JPMorgan's role as a kind of bellwether for the broader industry, the bank typically kicks off earnings season. This quarter, that role was occupied by Wells Fargo, which reported a slump in revenue thanks, in part, to a slowdown in mortgage refinancing. Another JPMorgan rival, Citigroup, which reported its second-quarter earnings on Monday, continued to grapple with a slowdown in both debt and currency trading.
Together the earnings point to a fundamental shift on Wall Street, where traditional profit centers like trading have been winnowed by persistently low interest rates and a raft of regulations passed in the aftermath of the financial crisis. It's still unclear whether that trading activity is permanently gone or whether it will return, albeit, perhaps at lower volumes than in the past.
At an investor conference in June, Marianne Lake, JPMorgan's chief financial officer, obliquely referred to 'too much capacity' in the bank's trading divisions, hinting at how a prolonged slowdown in investment banking revenue could lead JPMorgan to slash compensation or jobs. It wasn't the first time that the bank has foreshadowed the slowdown that resonated throughout Tuesday's earnings. In May, JPMorgan cautioned that revenue in the second quarter from from trading, both fixed-income and equities, would swoon by as much as 20 percent.
For JPMorgan, the earnings also mark the first time that Jamie Dimon, the bank's chief executive, has addressed analysts and investors since announcing earlier this month that he has throat cancer. While Mr. Dimon, 58, has assured investors that his condition is curable and has not spread beyond the lymph nodes on the right side of his neck, the news reignited long-standing questions about who might take over from Mr. Dimon, at least for a little while.
Mr. Dimon, who has held the dual roles of chief executive and chairman at the bank since 2006, has been atop JPMorgan longer than any other current bank chief, and holds a larger-than-life role within the bank. Just a day after the announcement, the bank's share price fell 1 percent, even as the broader stock market remained buoyant at near record highs.
JPMorgan's board worked to reassure investors that it has already developed succession plans. Among the potential successors, according to people briefed on the matter, are Gordon Smith, the head of JPMorgan's consumer bank, and Mary Erdoes, who runs the asset management business.
The earnings on Monday were almost as notable for what was absent: any banner legal costs. The bank has largely emerged from a turbulent period-a stretch of months in which JPMorgan reached a record $13 billion pact in November over its sale of mortgage securities.
In the third quarter of last year, in fact, those costs led JPMorgan to report its first quarterly loss under the chief executive.
Despite the second-quarter decline, Mr. Dimon said on Tuesday, 'Toward the end of the second quarter, we saw encouraging signs across our businesses including an uptick in wholesale utilization, strengthening pipelines in our commercial and business banking segments, and some improvements in markets activity.'
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