JPMorgan Chase (JPM) saw a sharp increase in net income derived from mortgage banking in the first quarter, with income rising to $326 million from $132 million in the first quarter of 2014.
According to Chase, its mortgage banking net revenue was $1.7 billion, an increase of $151 million compared with the prior year, driven by lower mortgage servicing rights risk management losses, partially offset by lower servicing revenue.
Chase’s MSR risk management reported a loss of $68 million, compared with a loss of $400 million in the prior year, which included a negative $460 million fair value adjustment primarily related to higher capital allocated to the business.
Noninterest expense was $1.2 billion, a decrease of $184 million from the prior year, reflecting lower compensation expense. The provision for credit losses was $4 million, slightly higher than the prior year, despite lower net charge-offs of $104 million, offset by a reduction in the non credit-impaired allowance for loan losses of $100 million as home prices and delinquency trends continued to improve.
One of the main drivers of the increase was a 45% year-over-year increase in mortgage originations. According to Chase, its’ mortgage originations rose from $17 million in 2014’s first quarter to $24.7 billion in 2015’s first quarter, which was also a 7% increase over 2014’s fourth quarter, which saw mortgage originations of $23 bilion.
Overall, Chase reported total net income of $5.9 billion, or $1.45 per share, on revenue of $24.8 billion.
According to Briefing.com, Chase’s earnings per share were $0.05 better than the Capital IQ Consensus Estimate of $1.40.
“JPMorgan Chase continues to support consumers, businesses and communities and make a significant positive impact. We have an outstanding franchise which is getting safer and stronger, and is gaining market share over time,” JPMorgan Chase CEO and Chairman Jamie Dimon said.
“We continue to build the company for the long-term, we are investing in controls, infrastructure, systems, technology, new products and bankers,” Dimon continued. “We will continue to navigate challenges and deliver for our clients, shareholders and communities.”
Commenting on the bank’s rise in mortgage business, Dimon said the bank is adding higher quality loans to its books.
“Consumer & Community Banking saw healthy growth in deposits, investment assets and loans and continued to deepen relationships – winning four TNS Choice Awards in 2015, including #1 in consumer retail banking nationally for the third consecutive year,” Dimon said. “In Mortgage, we had higher originations and continued to add high-quality loans to our balance sheet while managing expenses.”
According to Chase, the first quarter saw a “significant item $487 million (aftertax) legal expense ($0.13 per share aftertax decrease in earnings).”
Additionally, Chase reported:
- Tangible book value per share of $45.45, up 9% YoY
- Basel III common equity Tier 1 of $167 billion, or ratio of 10.6%
- Compliant with U.S. LCR – HQLA of $614 billion
- Firm SLR of 5.7% and Bank SLR of 6.0%
- Core loans up 10% compared with the prior year
Chase also intends to increase the quarterly common stock dividend in the second quarter of 2015 from the current $0.40 per share to $0.44 per share.