JPM Misses Top And Bottom Line, Slammed By Collapse In Mortgage Origination, Slide In Fixed Income Trading

Tyler Durden's picture

So much for the infallible Mr. Dimon.

Moments ago, JPM reported Q1 earnings which missed across the board, driven by the now traditional double whammy of collapsing mortgage revenues - the lifeblood of any old normal bank - and fixed income trading revenues  - the lifeblood of new normal banks. Specifically, JPM reported revenues of $23.9 billion, well below the expected $24.5 billion, matched by a reported earnings miss of $1.28, down from $1.59 a quarter ago (and down $0.02 from Q4, 2014), also missing consensus estimates of $1.38.

The breakdown was as follows:

 

However, recall that as Zero Hedge first reported last quarter, JPM recently jumped on the FVA bandwagon, to wit:

In addition to analyzing the Firm’s consolidated results on a reported basis, management reviews the Firm’s results and the results of the lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications to present total consolidated net revenue for the Firm (and total net revenue for each of the business segments) on a fully taxable-equivalent (“FTE”) basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable securities and investments. This non-GAAP financial measure allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on consolidated net income/(loss) as reported by the Firm or net income/(loss) as reported by the lines of business.

... which means one has to look at revenue on both a GAAP and non-GAAP basis. Sure enough, the company's non-GAAP revenue, reported quietly in the footnotes, was $1.1 billion less than the non-GAAP print.

 

Fine, revenue you can't fudge as easily. But what about EPS - after all the firm should be quite able to boost "earnings" by taking out another abnormally sized loan loss reserve release. It is here that we observe something curious: while last quarter JPM generated $1.3 billion in "bottom line earnings" from loan reserve releases, this quarter the number was down to a far smaller print, as JPM took only $417MM in releases, down substantially from $1.2 billion a year ago. Considering JPM still has a total reserve of $15.8 billion it was strange why it didn't take out more - it is almost as if Jamie Dimon wanted to miss the bottom line!

 

Going back to the firm's actual operations, here is where the bulk of the pain came from: mortgages, or rather the lack thereof.

Of note here: Mortgage Production was a disaster with mortgage related revenue of only $292 million, and net loss of $58 million.

As JPM says, "Revenue 76% lower YoY, primarily on lower volumes; originations down 68% YoY and 27% QoQ"

Nothing better in the servicing division: "Mortgage Servicing pretax loss of $270mm, down $169mm YoY"

The culprit: mortgage originations, which tumbled from $52.7 bn in Q1 2013, and $23.3bn in Q4 2013, to just $17.0 billion as the US consumer continues to not want to buy houses on credit.  Which also means that as JPM further writes, "Headcount down ~14,000, or ~30% since the beginning of 2013, and ~3,000 QoQ."

Oh well, at least those "all cash" Chinese and Russian buyers are happy, if not so much JPM's soon to be terminated mortgage bankers.

Tied with this is the fact that as we expected, JPM's market-based Net Interest Margin continues to decline, hitting a new record low of just 0.84%. The recent uber flattening in the yield curve will certainly not help.

 

And then, looking at the Investment Bank, things are just as bad if not worse:

 

Yup - fixed income markets, that key profit center for every bank - crashed by $1 billion Y/Y to only $3.8 billion as even equity market revenue dropped by $45 million to $1.3 billion. Also note the average VaR which tumbled from $62mm to only $42mm - as if Jamie is telling the traders to take zero risk.

Which ties in with the last slide - remember the London Whale operation, the CIO, which was a revenue and income goldmine for so long until it blew up? So much for that.

Full earnings presentation below.

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Charles Nelson Reilly's picture

Jaime takes another paycut?
Jaime gets called into the BOD office and there is a nail gun on the table?

Occident Mortal's picture

Mr Dimon, just 5 years after a hundred billion dollar taxpayer bailout, it looks like your bank is going to shit again...

 

"That's why I am richer than you"

Wahooo's picture

No doubt that after the conference call, JPM closes green today.

eclectic syncretist's picture

JPM is likely very short this market.

They could report essentially any earnings they like under "mark to fantasy" accounting standards approved for financial institutions by Congress.  They pretty much own congress after all. 

Think about it.  After marking to fantasy upwards for years suddenly they mark to fantasy down now.  Why would they do that? 

Oh regional Indian's picture

They are making it look like JPM is the fall bank.

Unikely. The bottom is probably falling out of another gorilla's numbers as we speak/type.

Left hand, Right hand, Nugen Hand?

ori

Wahooo's picture

Buffet's bank just reported, earnings up, pre-market up. Looks like the Feds are taking JPM down a notch at a time.

Manthong's picture

What’s the big deal?

All it takes is for the Fed to conjure up another few trillion like they have been doing for the last few years.

insanelysane's picture

It's like the South Park episode where the devil bets on Jesus in a boxing match between the devil and Jesus.

eclectic syncretist's picture

Compare JPM earnings with WFC this morning.  WFC says everything is great and full steam ahead.  In many details Wells says the exact opposite about the economy that JPM says in its earning report.  Clearly they didn't get the memo to mark to the same fantasy.

Mae Kadoodie's picture

Just a tempest in a...errr, never mind..

chapaev's ghost's picture

How does the quote go? "....First by inflation and then by deflation..."

 

 

 

Headbanger's picture

So where's this office?

I'm sending a 45acp he can use instead.

And yes, as a matter of fact.. It really is a Hi-Point for that fucking scum ball!

http://www.hi-pointfirearms.com/handguns/handguns_45acp.html

 

And the """market""" fucking IMPLODES today!

May well turn out to be an even MOAR Black Friday than the last time!

Charles Nelson Reilly's picture

Double post..... So fuck you JPM!

TruthInSunshine's picture

Jamie Dimon puts his Presidential Cufflinks one cuff at a time.

Occident Mortal's picture

How else can you put cufflinks on?

Oh regional Indian's picture

By having two newbie traders come and do it for you as a "ritual", together, every morning....

Who knows what goes on behind closed vault doors...

ori

Occident Mortal's picture

Because Jamie Dimon goes to the office and then gets dressed?

 

Oh regional Indian's picture

I imagine you can leave your cuff-links off and still appear dressed?

Nein?

DeadFred's picture

Before being transplanted into his host symbiont's body he used to put them on one claw a time.

Cursive's picture

@TiS

Jamie Dimon, like Chuck Norris, doesn't wear cufflinks.  He doesn't even wear clothes.  He just MAKES us all THINK he's wearing clothes and cufflinks.

holgerdanske's picture

And this after all the stops have been pulled to make the thing look as good as possible. I wonder if it is, in reality, not much, much worse.

Banks have been found defrauding, colluding and cheating on all levels, why not with their own figures?. After all, that would be much easier.

Got gold?

Squid-puppets a-go-go's picture

Man, first  Goldman Sachs' giant Squid slips under the waves, now Moby Dick is diving to the deep

 

youngman's picture

Goodthing he paid all those fines last year....

Cognitive Dissonance's picture

It's a real bitch when, even in a (Fed) rigged market, you can't make a decent profit.

There ought to be a law.

El Hosel's picture

What happened to the 100% "Winning" trading daze phenoms? Better call in Dick Bove to explain how cheap the bank stocks are, and how "regulation" uncertainty is holding them back.

Cursive's picture

Who needs earnings when you have a "fortress" balance sheet?  /sarc

It is here that we observe something curious: while last quarter JPM generated $1.3 billion in "bottom line earnings" from loan reserve releases, this quarter the number was down to a far smaller print, as JPM took only $417MM in releases, down substantially from $1.2 billion a year ago. Considering JPM still has a total reserve of $15.8 billion it was strange why it didn't take out more - it is almost as if Jamie Dimon wanted to miss the bottom line!

 

That, or they know what is coming: Mortgage Meltdown Part Deux.

 

Ban KKiller's picture

Fortress investment group owns Nationstar mortgage LLC. Total criminal outfits, Fuck  'em. Sell!

Death, by law, to Banksters!

AdvancingTime's picture

Over the last several years a pattern of a random statements from the Fed and several other sources have caused crazy and illogical rallies. An unholy alliance of the Federal Reserve, the government, and the too big to fail has left those of us who question the validity of the recovery in a precarious position.

This is a reason for the bears to be cautious For the big boys, its insider information and computer trading, this includes computing patterns that exploit where stops are placed, this improves their ability to wash the timid and weak bears out of their positions in this manipulated market.

http://brucewilds.blogspot.com/2014/04/bears-have-little-reason-for-conf...

Squid Viscous's picture

Dad - can we still rent that mansion in the Hampsteins for the summer?

- younger crypto Dimon

TheBoyPlunger's picture

Up here in the Seattle housing bubble 2.0 all the decent properties are being bought with all cash by wealthy Chinese. No mortgages necessary.

y3maxx's picture

...One day soon, the USSA "Claws back" all "State side" foreign owned property.

El Hosel's picture

U sen ren check now, round eye.

db51's picture

There outh to be a law?     There will be one soon.

Dubaibanker's picture

Apparently, Dimon has reached the final stage of grief: He has accepted the decline of JPM as an eventuality.

Jamie Dimon hits final stage of grief: acceptance

Chinese CEO of JPM has left the building...leaving an investigation behind for Dimon to handle.

JPMorgan top China banker Fang to leave amid hiring probe

Commodity business is already under investigation despite being sold recently....see below post on ZH as well. Size and scale of JPM keeps declining rapidly every single month. 

J.P. Morgan's fmr. commodities chief under investigation

 

In the Middle East, they have been cutting corporate relationships with top banks....including in Saudi and Abu Dhabi.

IFR-JP Morgan cuts banking ties with Dubai's Emirates NBD -sources

8,000 further jobs to go....

JPMorgan to cut 8,000 jobs, lowers 2014 profit target

Another line of business sold in the US....

J.P. MORGAN SIGNS AGREEMENT TO SELL ITS LARGE-MARKET 401K RECORDKEEPING BUSINESS, J.P. MORGAN RETIREMENT PLAN SERVICES, TO GREAT-WEST FINANCIAL 
LooseLee's picture

Strange...I thought the 'Market' was always right, 'all knowing' and discounted at least 6 months out. Then why didn't it discount the banks earnings for Q1 2014 back in Q3 of last year? It knew about Dodd/Frank, etc. I can only conclude that the 'market' (and all of the sell-side analysts, media whores, as well as Bulltards) are full of S&$%! Unless, of course, the 'market' died sometime in the 1990's and has henceforth been hijacked by the FED and their lackey bootlickers. So what is it?

sangell's picture

...and that's why he is richer than you!

Ban KKiller's picture

What is over under for bankster deaths this week?

 

intric8's picture

either over a bridge or under a bus

venturen's picture

more like QE drying up! Have stolen all the money they can....nothing left to scam

Ban KKiller's picture

Time for bonuses, gold plated nail guns for all top execs. 

Silver plated shitgums for lowly managers.

Buy silver today. Or seeds.

A_Nejad's picture

When the head of the tribe shows bleeding, you know the ENTIRE tribe is running outa lies....It's like "in your face", not in Yiddish.... 

firstdivision's picture

...the wheels on the bus go round and round, round and round, round and round.  The wheels on the bus go round and round, 'til the fall off.

kurt's picture

Huge breakout up day today! To the moon! To the MOON!!!!

topshelfstuff's picture

It just dawned on me, is there something going on that we are all missing here? Something JPM knows


JPMorgan sells physical commodities unit to Mercuria for ... www.reuters.com/.../us-jpmorgan-mercuria-idUSBREA2I0LG201...
Reuters 

Mar 19, 2014

JP Morgan sells $160B Kansas City retirement plan operation

www.bizjournals.com/.../jp-morgan-sells-160b-kansas-city-retire...

JP Morgan Chase sells short-term Treasury holdings www.usatoday.com/story/.../jpmorgan...sells.../2962461/
USA Today 

Oct 10, 2013 - NEW YORK (AP) — JPMorgan Chase said late Thursday that it is selling the government debt it holds in money market funds

JP Morgan Chase's sale of private equity arm stalls www.pehub.com/.../jp-morgan-chases-sale-of-private-equity-arm-stalls/

Mar 8, 2014 - The auction of JP Morgan Chase's private equity business, One Equity Partners, in the market since at least November, has hit an impasse

JPMorgan Is Selling The Building That Houses Its Gold Vault www.zerohedge.com/.../jpmorgan-selling-building-houses-its...
Zero Hedge 

Aug 18, 2013


JPMorgan Sells 401(k) Recordkeeping to Great-West Lifeco ... www.bloomberg.com/.../jpmorgan-to-sell-401-k-unit-to-...
Bloomberg L.P. 

Apr 3, 2014 - JPMorgan Chase & Co., the largest U.S. lender, agreed to sell its large-market 401(k) recordkeeping business

JPMorgan To Exit Foodstamp, Other Prepaid Cards Business

JPMorgan's surprise announcement

Curiously, it was just over two years ago when JPM said this about its EBT business:

“This business is a very important business to JP Morgan,” Christopher Paton, the company’s managing director of treasury services, told Bloomberg News in 2011. “It’s an important business in terms of its size and scale. We also regard it as very important in the sense that we are delivering a very useful social function. We are a key part of this benefit delivery mechanism. Right now volumes have gone through the roof in the past couple of years or so … The good news from JP Morgan’s perspective is the infrastructure that we built has been able to cope with that increase in volume.”

Guess the social function isn't that important any more. However, along with the responsibilities, JPM is losing a substantial revenue stream: