JPMorgan profit beats estimates as mortgage revenue soars

JPMorgan Chase & Co., the biggest U.S. bank by assets, posted a record third-quarter profit that beat analysts’ estimates as mortgage revenue soared 72 percent.

Net income rose 34 percent to $5.71 billion, or $1.40 a share, from $4.26 billion, or $1.02, a year earlier, the New York-based company said today in a statement. Earnings, which included a loss on accounting adjustments, beat the average estimate of $1.20 among 30 analysts surveyed by Bloomberg.

JPMorgan said losses on its remaining wrong-way bet on credit derivatives were “modest” in the third quarter after the bank lost $5.8 billion in the first half of 2012, prompting investigations from U.S. and international authorities. Chief Executive Officer Jamie Dimon, 56, got help restoring investor confidence from historically low interest rates and government programs that fueled demand for home loans.

“The housing market has turned the corner,” Dimon said in the statement. “We were encouraged that credit trends continued to modestly improve, and, as a result, the firm reduced the related loan-loss reserves by $900 million.”

Shares of JPMorgan fell to $42.06 as of 8:17 a.m. in New York from $42.10 at the close yesterday. The stock was up 27 percent this year before today, while the KBW Index of the largest banks rose 30 percent.

Revenue Gains

Revenue climbed 6 percent to $25.9 billion from $24.4 billion during the third quarter of last year. At the investment-banking unit, it fell 1 percent to $6.28 billion from $6.37 billion.

Fixed-income and equity-markets revenue was virtually unchanged at $4.76 billion from $4.75 billion a year earlier and $4.98 billion in the second quarter, the company said. The investment bank’s credit portfolio, which contains the remaining credit derivatives position, generated $90 million in revenue from $578 million in the third quarter of last year.

Trading and the investment bank’s credit portfolio declined by $211 million because of a so-called debt-valuation adjustment in the third quarter as the price of the bank’s debt rose.

Retail banking, which includes home loans and checking accounts, earned $1.41 billion, up 21 percent from $1.16 billion a year earlier. The net interest margin, which measures the profit margin on lending, narrowed to 2.43 percent from 2.66 percent a year earlier.

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