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JPM Earnings Slide 8% On Drop In Trading Volume, Mortgage Production Offset By $1.5 Billion Stock Buyback

Tyler Durden's picture




 

While JPM stock is trading modestly higher in the pre-market following its earnings report which beat expectations on the top and the bottom line, it doesn't hide a troubling trend seen across all the banks that have reported so far, one we forecast would take place in an environment of plunging trading volumes and near-record low mortgage production: slumping earnings. J.P. Morgan Chase JPM +0.88% & Co. said second-quarter earnings sank 7.9% as the bank continued to grapple with weak trading revenue. Indeed, as WSJ summarized, "J.P. Morgan Chase & Co. said second-quarter earnings sank 7.9% as the bank continued to grapple with weak trading revenue."

GAAP revenue was down 3% to $24.45 billion, and was down 2.3% on a non-GAAP (yes, non-GAAP revenue) basis to $25.35 billion. Still, this beat estimates of of $23.89 billion and is the reason for JPM's 2% rise. J.P. Morgan reported a profit of $6 billion, or $1.46 a share, compared with $6.5 billion, or $1.60 a share, a year earlier. The latest earnings figures included a legal expense of 13 cents a share.

A big driver in the EPS beat was JPM's repurchase of $1.5 billion in common stock, suggesting the bank has $5 billion left for buybacks for the Q3 2014-Q1 2015 period.

Notably, JPM's reserve release of $521 million was a key contributor to EPS, well above the $417 million reported a quarter ago and shows that when JPM needs to report a profit at all costs it will certainly resort to raiding the piggy bank.

One part of the reason for the ongoing contraction in JPM top and bottom line numbers: mortgage banking.

What JPM had to say about this:

  • Mortgage Production pretax income of $63mm, down $519mm YoY
    • Revenue, excluding repurchase, 74% lower YoY primarily on lower volumes; originations down 66% YoY and 1% QoQ
    • Partially offset by lower expenses and repurchase benefit
  • Mortgage Servicing pretax income of $479mm, up $346mm YoY
    • Net servicing-related revenue of $693mm, down 10% YoY
    • Servicing expense of $552mm, down 23% YoY
    • MSR risk management income of $338mm
  • Headcount down ~13,000 YoY and ~5,000 YTD

The other reason for declining profits: ongoing deterioration in the firm's trading volumes, offset partially by Investment Banking services.

 

From JPM:

  • Markets & Investor Services revenue
  • Markets revenue of $4.6B, down 14% YoY, primarily driven by:
    • Fixed Income Markets of $3.5B, down 15% YoY, on historically low levels of volatility and lower client activity across products
    • Equity Markets of $1.2B, down 10% YoY, primarily due to lower derivatives revenue
  • Securities Services revenue of $1.1B, up 5% YoY, primarily driven by higher NII on increased deposits
  • Credit Adjustments & Other gain of $125mm driven by net FVA/DVA

And, not surprisingly, just like with Wells and Citi, NIM declined yet again:

 

In conclusion, here is JPM's outlook:

 

Full presentation below:

 

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Tue, 07/15/2014 - 07:46 | 4958432 Squid-puppets a...
Squid-puppets a-go-go's picture

When this whale gets beached, can we use the 'blubber explosion' approach instead of tryig to push it back to sea??

Tue, 07/15/2014 - 08:00 | 4958456 max2205
max2205's picture

Fuck you FASB

 

 

 

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Tue, 07/15/2014 - 08:04 | 4958461 GetZeeGold
GetZeeGold's picture

 

 

Time to breakout the cufflinks!

Tue, 07/15/2014 - 08:08 | 4958468 Headbanger
Headbanger's picture

Fuck that.

Just march them to the nearest wall and shoot em all.

Tue, 07/15/2014 - 08:09 | 4958472 Squid-puppets a...
Squid-puppets a-go-go's picture

Fantasy accounting standards board

Tue, 07/15/2014 - 07:47 | 4958434 SoDamnMad
SoDamnMad's picture

Is it "borrowing" free money to support the stock buy backs?  Wish I could do that?

Tue, 07/15/2014 - 07:49 | 4958439 Winston Churchill
Winston Churchill's picture

Declining profits with unlimited free money.

Hell of a job Dimoney.

Tue, 07/15/2014 - 08:21 | 4958485 TeamDepends
TeamDepends's picture

Interesting how he got "throat cancer".  Mr. Dimon will be recuperating somewhere in the Caribbean for as long as it takes.

Tue, 07/15/2014 - 07:49 | 4958435 digitlman
digitlman's picture

Fuck these guys.

Tue, 07/15/2014 - 07:49 | 4958437 ArkansasAngie
ArkansasAngie's picture

Buy the spike?

No thanks

I'm thinking of shorting going into July 30.  

Tue, 07/15/2014 - 07:49 | 4958438 fonzannoon
fonzannoon's picture

Citi up big

JPM up big

GS up big

BAC up big

Every financial site spent the last 3 weeks talking about how shitty the banks earnings reports would be. What a no brainer trade we missed. 5 fucking years and I still forget how this works sometimes. Annoying.

Tue, 07/15/2014 - 07:53 | 4958443 Obchelli
Obchelli's picture

But, but, but stock is up so all this analysis seeking of true value is meaningless... But no matter what prices will be moving up cause this time is different...

Tue, 07/15/2014 - 07:54 | 4958445 Seasmoke
Seasmoke's picture

Bonuses for everyone !!!

Tue, 07/15/2014 - 07:56 | 4958447 jack stephan
jack stephan's picture

So what 60 deaths, maybe more.....half are real and half stowaways to duck out. Mankind has had a war declared by these banker pricks, can't do it themselves so they get a self righteous "but I funded it shit"

If real folks had control over it instead of a knee of their necks, it would be 10 times better. I had a date with a Ivy League sex pot, and she was all foam no beer, lucky she didn't get a drink in her face.

All that supposed education but no real brains, I told her off right at the table. I told her can't you use your powers for good instead of evil for fuckin five minutes? Smart dumb bitch.

She'll never eat there ever again.

http://www.youtube.com/watch?v=IVV1Hg3DZ5s&sns=em

Tue, 07/15/2014 - 07:56 | 4958448 jubber
jubber's picture

S&P 2000 secured.

Tue, 07/15/2014 - 08:10 | 4958470 Ban KKiller
Ban KKiller's picture

Better use that last four billion to buy back more of their own stock to boost EPS, and I mean now. What morally crippled idiot owns shares in a continuing criminal enterprise run by the fascist oligarchy? What kind of morally bankrupt Muppet would slave for a bank? Leave the false security of the Banksters and live free!

Tue, 07/15/2014 - 08:22 | 4958486 d edwards
d edwards's picture

Profits? We don' need no steekin' profits!

 

 

Tue, 07/15/2014 - 08:33 | 4958510 buzzsaw99
buzzsaw99's picture

imo those earnings sucked and will get worse. glad they are enjoying this great recovery.

Tue, 07/15/2014 - 10:39 | 4958926 Conax
Conax's picture

Their stock price is up $2.39 already this morning, they are buying with both hands.  Free money fixes everything!

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