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Market Wrap-up for Apr. 14 - JPM and WFC Kick off Bank Earnings

This morning, two mega-banks kicked off today’s earnings reports, beating the Street’s estimates.

JP Morgan Posts 12% Rise in Profits

Before the opening bell, JP Morgan (JPM ) reported its first quarter results:

  • EPS came in at $1.45, beating estimates of $1.38
  • Revenue was reported at $24.8 billion, above the consensus estimate of $24.4 billion.
  • Profits came in at $5.91 billion, up 12% from last year’s Q1 results of $5.27 billion.

This is only the second time in the last seven quarters that JPM managed to beat analyst earnings expectations. All four of JPM’s business units increased profits this quarter, though the company’s trading revenue increased an impressive 9% to $5.67 billion from a year prior. This profit increase included a 4.5% rise in bond-trading and a 22% rise in stock trading.

In it’s mortgage division, which is the second-largest in the U.S. by volume, JPM raked in profits of $326 million – nearly three times the amount reported for the first quarter of 2014. It should also be noted that JPM increased its capital during Q1 in an effort to cushion themselves from potential loan defaults, specifically from oil and gas companies.

In addition to these figures, JPM reported an increase of $247 million in noninterest expense, due to “Firm wide legal expense.” The company also benefited from $177 million in tax adjustments; last year, the company was charged $90 million in taxes.

Most importantly, JPM’s Board indicated that it will increase quarterly dividend payments in the second quarter from the current $0.40 per share to $0.44 per share, marking a 10% increase.

Commenting on the results, CEO Jamie Dimon stated “JPMorgan Chase continues to support consumers, businesses and communities and make a significant positive impact. We have an outstanding franchise which is getting safer and stronger, and is gaining market share over time. We continue to build the company for the long-term, we are investing in controls, infrastructure, systems, technology, new products and bankers. We will continue to navigate challenges and deliver for our clients, shareholders and communities.”

Wells Fargo Reports First Profit Drop in Four Years

Also this morning, Wells Fargo (WFC ) posted its Q1 results:

  • Earnings came in at $1.04 per share, beating estimates of $0.98.
  • Revenue was reported at $21.3 billion, slightly above the consensus of $21.2 billion.
  • Profit was reported at $5.8 billion, down from the $5.89 billion figure seen a year prior.

The 1.5% decline in profit was the first drop WFC has reported in the last 18 consecutive quarters. The bank’s loan growth, however, continued to show strength, rising 4.2% from a year prior. WFC’s profitability in lending activities, however, continue to decline; the bank’s net interest margin fell to 2.95% from last year’s Q1 figure of 3.20%.

Wells Fargo’s mortgage department, which is the largest in the U.S. by volume, reported $1.55 billion in fees, a 2.5% uptick from last year. Home loan originations came in at $49 billion, compared to $44 billion in prior quarter and $36 billion in Q1 of 2014.

Like JPM, Wells Fargo also set aside additional capital of $608 million to cover potential defaults. It should be noted that roughly 2% of the bank’s loan portfolio is comprised of loans in the energy sector. In Q1, WFC lost $708 million to loan defaults, or 0.33% of its portfolio.

Commenting on the results, Chairman and CEO John Stumpf noted “Our solid first quarter results again reflected the benefit of our diversified business model and the continued focus of our 266,000 team members on serving the needs of consumer and business customers. We continued to strengthen our customer relationships in the quarter, as reflected in strong growth in deposits and primary checking customers. In addition, our mortgage business was able to serve more customers by refinancing their mortgage loans with lower rates. Capital levels remained strong, and we were pleased to receive a non-objection to our 2015 Capital Plan, which included a proposed increase in our dividend rate to $0.375 per common share in second quarter 2015, subject to Board approval.”

The Bottom Line

We’ll be sure to keep you informed of all the earnings results this season for dividend-paying companies.

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