JPMorgan Disappoints Again; Wells Fargo Posts Strong Growth

Meng Meng |

Two of the largest lenders showed mixed results as the first earning season of 2014 kicked into full gear. JPMorgan Chase & Co (JPM) posted disappointing earnings, indicating the bank’s struggle to turn around even as the economy slowly picked pace. Meanwhile, Wells Fargo & Co. (WFC)  in contrast, beat average analyst expectations with declining expenses and less loan losses.

JPMorgan Unable to Reverse a Decline

Profits of JPMorgan fell 19 percent in the first quarter of 2014 on weaker results across several business lines, including mortgages, credit card sales and fixed-income trading.

The bank reported lower-than-expected earnings of $5.27 billion, or $1.28 a piece, compared with a net income of $6.53 billion, or $1.59 a share in the year-earlier period. Revenue was down 7.7 percent to $23.86 billion.

A bellwether for the rest of the banking industry, JP Morgan marked an 18 percent decrease in fixed-income revenue, reflecting lower industry-wide bond trading volumes. Mortgage lending income, at same time, had suffered from a rising borrowing rate that pushed away potential homebuyers.

Mortgage banking net income plunged to $114 million in the first quarter, from $559 million in the year-earlier period.

Nevertheless, the bank recovered nicely from a scandal-ridden 2013, paying less ligation related expenses this quarter. That has driven down the banks’ noninterest expenses by 5.1 percent. In 2013, the company paid a record $20 billion in penalties out of pocket for screw-ups and mistakes.

Shares of JPMorgan tumbled 3.4 percent to $55.46 per share in Friday afternoon trading, as tech stocks selloff sent the broader market lower.

Wells Fargo Reins in Costs

Wells Fargo earned a profit of $5. 9 billion, or $1.05 per share, versus earnings of $5.17 billion or $0.92 a piece from the same quarter in 2013.

Wells Fargo is the largest lender for homeowners and investors, and the market often looks at its performance as a barometer of the housing market. The bank’s total loans balance reached $826.4 billion in the period ending March 31, 2014, up $4.2 billion from the same quarter last year. In the earning release, the company highlighted growth in both commercial real estate and core mortgage portfolio.

Revenue for the first quarter was $20.6 billion, slightly down from $21.3 billion of the same quarter in 2013. What really beefed up the net income was the bank’s efforts to cut spending.

Net interests were $11.9 billion, down $452 million. Meanwhile, Well Fargo’s credit losses were $825 million in first quarter 2014, compared with $1.4 billion in first quarter 2013, a 42 percent year-over-year improvement and a historically low level, according to Chief Risk Officer Mike Loughlin.

The bank has recorded growth for 17 consecutive quarters and the momentum contributed to higher share price today. Wells Fargo ticked up 1.7 percent to $48.52 a share.

Both Lenders Issue Positive Projections; Analysts Agree

Both banks expect to bring in more revenue as macroeconomic situations continue to improve. For the next quarter, analyst estimate $1.49 earnings per share for JPMorgan and $1.01 per share for Wells Fargo.

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Companies

Symbol Name Price Change % Volume
JPM JP Morgan Chase 83.26 1.66 2.03 18,529,840
WFC Wells Fargo & Company 54.35 0.77 1.44 24,793,902
OPSSF Opsens Inc 1.25 0.00 0.00 0

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