By Dawn Kopecki April 14 (Bloomberg) — JPMorgan Chase & Co. said a “broad- based” economic recovery boosted first-quarter earnings 55 percent, surprising analysts with record fixed-income trading revenue and a better-than-expected outlook for consumer credit. Net income at the second-biggest U.S. bank by assets climbed to $3.33 billion, or 74 cents a share, from $2.14 billion, or 40 cents, in the same period a year earlier and from $3.28 billion in the fourth quarter, the New York-based company said today in a statement. Record fixed-income trading revenue and a reduction in provisions for credit losses helped the bank beat the average estimate of 64 cents per share projected by 21 analysts surveyed by Bloomberg. “There is clear and broad-based improvement in the economic factors in the United States and around the world,” Chief Executive Officer Jamie Dimon , 54, told reporters on a conference call. Dimon cited signs including stabilizing U.S. home prices that signal the economy may be poised for a “strong recovery.” Chief Financial Officer Mike Cavanagh said delinquencies for credit cards and mortgages in which the borrower is behind by just one payment also improved in the first quarter, indicating that consumers’ finances are gaining strength after the worst recession in more than 70 years. JPMorgan, which repaid $25 billion in federal aid last year, remained profitable throughout the financial crisis, relying on fee income to counter loan losses in mortgage lending and credit cards. The bank, the No. 1 underwriter of stocks and bonds in the U.S. last year, generated three-quarters of first- quarter profit from its investment bank. Unexpected Strength “Nobody saw those types of numbers coming,” said Paul Miller , a former examiner for the Federal Reserve Bank of Philadelphia and analyst at FBR Capital Markets in Arlington, Virginia. JPMorgan’s earnings bode well for Bank of America Corp. and other banks, which report earnings later this month, Miller said. “Credit remains a wild card here, but Jamie talked very, very positive about credit and the consumer,” he said. JPMorgan rose $1.54, or 3.4 percent, to $47.41 in composite trading on the New York Stock Exchange at 12:20 p.m., the biggest gain in five months. The shares are up 14 percent this year. “China’s growing, India’s growing, Japan is growing, home prices have stopped going down, consumer income is up, consumers are spending, service and manufacturing indexes are up, inventories are still low, I could go on and on,” Dimon said. “This could be the makings of a good recovery. We don’t know for sure, but if you look at those factors, it’s pretty good.” ‘Real Improvement’ Cavanagh said on the call that there is “fundamental real improvement” in consumer mortgage and credit-card delinquencies. That didn’t translate into lower credit costs for the quarter, though he said it “augurs well for future quarters if those trends sustain themselves.” Home lending and credit-card losses continued to pull down earnings. Retail banking lost $131 million, compared with a $399 million net loss during the fourth quarter and a $474 million gain a year earlier. The company decreased provisions against future credit losses while setting aside $2.3 billion in reserves for lawsuits stemming from its purchase of Washington Mutual Inc. Credit-card services lost $303 million, compared with a net loss of $306 million in the prior three months and $547 million a year earlier. First-quarter revenue climbed 11 percent to $27.7 billion, beating the highest estimate among analysts in the Bloomberg survey. Fixed-income revenue was $5.46 billion, compared with $4.89 billion a year earlier. Fixed Income The firm said improving fixed-income markets contributed to the revenue gains, as did a $462 million reversal of provisions for credit costs in investment banking, which compared with $1.2 billion in expenses a year earlier. JPMorgan cited lower loan balances, driven by repayments and loan sales. The bank reduced total provisions for credit losses in all divisions to $7 billion, compared with $8.9 billion in the previous quarter and $10 billion the year before. The investment bank contributed $2.47 billion of JPMorgan’s $3.33 billion in net income, or 74 percent. That compares with 57 percent in the fourth quarter and 75 percent in the first quarter of 2009. “The good news is that the revenue picture was actually quite strong,” said Charles Peabody , an analyst at Portales Partners LLC, in an interview with Tom Keene on Bloomberg Radio. “And in particular, within investment banking, fixed-income trading. That had been an area of concern, so March must have been a blockbuster month.” Citigroup Earnings JPMorgan is the first of the largest U.S. banks to report earnings. Citigroup Inc. , the third-biggest lender behind JPMorgan and Bank of America, may report earnings of $340 million when it releases results on April 19, the Bloomberg survey shows. Charlotte, North Carolina-based Bank of America may report a profit of $1.1 billion on April 16. Dimon and Cavanagh didn’t give shareholders immediate hope of restoring the quarterly dividend , which was cut to 5 cents from 38 cents in February 2009. “We want to see continued sustained improvement in employment, continued sustained improvement in delinquencies” and a better understanding of new bank capital rules before the dividend will increase, Dimon said, reiterating what he told shareholders in his annual letter last month. Cavanagh said that increasing the payout to shareholders is “going to be down the road a little more.” To contact the reporter on this story: Dawn Kopecki in New York at dkopecki@bloomberg.com .
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JPMorgan Cites `Broad-Based’ Global Economic Recovery as Profit Surges 55%
