JPM JP Morgan Chase and Co

By David Benoit 

JPMorgan Chase & Co. said Tuesday that second-quarter profit rose 16%, with the strong performance of its consumer businesses offsetting a slowdown across its other operations.

The nation's largest bank reported a profit of $9.65 billion, or $2.82 a share. Analysts polled by FactSet had expected earnings of $2.50 a share. A year earlier, the bank reported a profit of $8.32 billion, or $2.29 per share. The quarter included a large gain on taxes that amounted to 23 cents per share.

Revenue rose to $28.83 billion from $27.75 billion a year ago, in line with analysts' expectations for $28.84 billion.

The results were another three-month record for the bank, but showed signs the rest of the year may struggle to keep up, particularly as it now expects the Federal Reserve to lower interest rates several times. Higher rates allow banks to charge more on loans, and the possibility of a Fed rate cut this year has tempered bank stocks.

The bank's net profit on its lending operations rose 7% to $14.4 billion, tailing off the growth in recent quarters that had been spurred by rising interest rates.

Jennifer Piepszak, the bank's new finance chief, said the JPMorgan is now predicting three rate cuts from the Fed this year and lowered its expectations for the lending operations. On a conference call, she said the bank expects around $57.5 billion in net-interest income for the full year, down from a prior estimate of more than $58 billion, and warned the number could go lower if there is more than one cut.

Chief Executive James Dimon said Fed rate cuts wouldn't affect the bank's expansion plans, including branch openings and technology spending, which have been more aggressive than other banks.

"We're not going to cut things we're trying to build...because of a recession or something like that," Mr. Dimon told analysts. "We have to spend to win in this business, and...we're going to do it, regardless of the environment."

Mr. Dimon said the results showed strength in the U.S. consumer and overall economy, though he cautioned that businesses were tempering expectations and cited the trade fight with China as the primary cause.

JPMorgan shares oscillated between small gains and losses in the morning as analysts said the results were in line with expectations and investors parsed what the interest-rate environment might mean for bank profits going forward. The stock had risen nearly 17% through Monday, better than the KBW Bank Index but trailing the S&P 500's 20% gain.

Revenue in its non-lending businesses grew a smaller 1% to $14.4 billion as the investment-banking operations failed to keep up with a record from last year's second quarter, falling 3%. Wall Street executives have warned of a weak quarter for trading due to low volatility in the markets.

JPMorgan's trading revenue was flat, but that included a one-time gain on the bank's stake in a trading platform. Without that gain, JPMorgan's core trading revenue declined 6% from a year ago. Profit in the investment-banking unit fell 8%.

Consumer bank profits rose 22% to $4.17 billion, with a 38% gain in card revenue. The bank said existing customers and businesses were spending more on credit cards and pointed to broad consumer retail spending as a positive sign.

The margin on what the bank earns on loans compared to what it pays out for deposits increased from the year-ago period but fell from the first quarter. It is expected to keep falling for the rest of the year.

JPMorgan's mortgage originations rose 14%, though revenue in home lending fell. Consumer-lending losses remained low.

The commercial bank earned $996 million, down 8%, and asset management operations earned $719 million, down 5%.

JPMorgan's mortgage originations rose 14%, though revenue in home lending fell.

Return on equity, a key measure of profitability, was 16% in the second quarter, compared with 14% a year ago.

Expenses at JPMorgan have been on the rise due to the bank's expansion its branch network and investments in technology. Total expenses rose 2% to $16.3 billion. The bank expects to spend $66 billion in the year.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

July 16, 2019 10:47 ET (14:47 GMT)

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