JPMorgan profit beats estimates as mortgage revenue soars

Mortgage Incentives

JPMorgan benefited from gains in mortgage lending as low interest rates and federal incentive programs encouraged homeowners to refinance. Mortgage fees and related revenue totaled $2.38 billion, compared with $1.38 billion a year earlier. Demand for loans also rose as the unemployment rate fell to 7.8 percent in September from 9.0 percent a year ago.

Fewer consumers fell behind on their credit-card payments in the third quarter compared with the same period in 2011. Loans at least 30 days overdue, a signal of future write-offs, fell to 2.15 percent from 2.9 percent in 2011. Write-offs dropped to 3.57 percent from 4.7 percent the prior year and 4.35 percent in the previous quarter. Industrywide, U.S. credit-card delinquencies were 2.32 percent in August, down from 3.04 percent a year earlier, according to Moody’s Investors Service.

Residential mortgage volume in the U.S. rose about 33 percent to $412 billion in the third quarter from a year earlier, spurred by incentives to refinance, according to estimates by the Mortgage Bankers Association. Corporate bond sales surged 66 percent to $987.3 billion in the three-month period from the same quarter last year, data compiled by Bloomberg show, as the Federal Reserve tried to boost the economy by lowering borrowing costs.

Litigation Costs

JPMorgan set aside $684 million more toward its litigation costs during the third 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.

The banking industry has been cutting staff and reducing expenses to mitigate slowing global economic growth and historically low interest rates that have compressed profit margins on lending and yields on investments.

The International Monetary Fund lowered its economic forecasts this week as the euro area’s debt crisis intensified. It also warned that global economic growth could be even weaker if officials in the U.S. and Europe fail to address threats to their economies.

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