JPMorgan 33% profit jump beats estimates on reserve releases

Mortgage Volume

U.S. lenders extended $482 billion in mortgages in the first quarter, up 29% from a year earlier, as government refinancing incentives and record low borrowing costs propelled demand, according to estimates from the Mortgage Bankers Association. To stimulate economic growth, the Federal Reserve has kept its benchmark interest rate near zero since December 2008, and is buying $85 billion a month in bonds to push down long-term rates.

After JPMorgan posted three straight years of record net income, Dimon is cutting expenses, responding to sluggish global growth and low interest rates that compress profit margins on lending and yields on investments. The firm is eliminating as many as 19,000 jobs in its mortgage and community-banking divisions through 2014, it said in February.

Investment Bank

The bank posted record profit last year even after its worst trading loss ever, a wrong-way bet on credit derivatives that generated at least $6.2 billion of losses in the first nine months of 2012. About $5.68 billion of the firm’s $21.3 billion in 2012 profit came from reserve releases as fewer consumers defaulted on their payments.

Revenue at the corporate and investment-bank unit, which was expanded last year, rose 9% to $10.1 billion. Trading results, which were hurt in the fourth quarter as the price of bank debt rose, benefited from a $126 million gain on a so- called debt-valuation adjustment, as the price of the firm’s debt fell. That compared with a $567 million loss in the fourth quarter.

Fixed-income and equity-markets trading revenue fell 5.4% from a year earlier to $6.09 billion, the company said. The investment bank’s fixed-income trading book, which contains the remaining credit-derivatives position, generated $4.75 billion in revenue, compared with $5.02 billion in the year- earlier period.

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