JPMorgan earnings beat estimates on mortgage lending gain

April 13 (Bloomberg) -- JPMorgan Chase & Co. reported a 3.1 percent drop in earnings, a smaller decline than analysts estimated as mortgage revenue surged and trading almost doubled from the fourth quarter.

First-quarter net income fell to $5.38 billion, or $1.31 a share, from a record $5.56 billion, or $1.28, in the same period a year earlier when there were more shares outstanding, the New York-based company said today in a statement. Per-share profit compared with an average estimate of $1.17 from 28 analysts surveyed by Bloomberg.

JPMorgan, led by Chief Executive Officer Jamie Dimon, 56, benefited from gains in mortgage lending as low interest rates and federal incentive programs encouraged homeowners to refinance. Mortgage fees and related revenue totaled $2 billion, compared with negative revenue of $489 million a year earlier. U.S. lenders made $318 billion in residential mortgages during the first quarter, including $242 billion in refinanced loans, according to the Mortgage Bankers Association.

“This is going to be a strong quarter for anyone who has a big mortgage lending or trading business,” said Paul Miller, an analyst at FBR Capital Markets, before results were released. He said expanded federal programs to aid in refinancings have given the market a boost. “It might be the best quarter in a long time.”

Fourth Quarter

Profit improved over the fourth quarter, when JPMorgan, the largest U.S. bank, earned $3.73 billion, or 90 cents a share.

“Credit continues to improve on the consumer side in both mortgage and credit card,” Chief Financial Officer Doug Braunstein said on a conference call with journalists. Credit card and mortgage delinquencies fell 36 percent and 25 percent over last year, respectively, he said.

Still, Dimon warned in the statement that fallout from the housing collapse isn’t over.

“We expect to see elevated levels of costs and losses associated with mortgage-related issues for a while longer,” he said.

JPMorgan, which acquired Washington Mutual and Bear Stearns Cos. in 2008, set aside $2.5 billion more toward its litigation costs during the first quarter mostly for mortgage-related lawsuits. Dimon previously told shareholders that the company would be making as much as $24 billion in annual profit if it weren’t for all of its mortgage losses.

Share Performance

JPMorgan fell $1.63, or 3.6 percent, to $43.21 in New York trading at 4:15 p.m. The shares gained 35 percent this year through yesterday, compared with a 24 percent increase for the KBW Bank Index.

Revenue rose 6 percent to $26.7 billion from $25.2 billion during the first quarter of last year. Revenue at the investment-banking unit didn’t match last year’s near-record $8.23 billion, falling 11 percent to $7.32 billion. It gained 68 percent from the fourth quarter as financial markets in Europe stabilized.

U.S. banks are in the middle of the industry’s worst two years of revenue growth since the Great Depression, according to Mike Mayo, an analyst with independent research firm CLSA in New York.

Net income in investment banking declined 29 percent, to $1.68 billion in the first quarter from $2.37 billion the year before and $726 million in the fourth quarter.

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