Mortgage

Mortgage banking creates drag on JPMorganÕ better-than-expected earnings

Drops 17% from last year

JPMorgan Chase kicked off another earnings season on Thursday, as it reported third quarter earnings that surpassed experts’ expectations.

But the news wasn't all good, especially in the mortgage banking sector.

Overall, the bank’s third quarter net income increased 7% from last year’s $6.3 billion to $6.7 billion this year. This also represents a drop of 4% from the second quarter’s net income of $7 billion, which beat expectations by $1.1 billion.

JPMorgan reported a net revenue of $25.3 billion, an increase from last year’s $24.7 billion but down slightly from $25.5 billion in the second quarter.

Earnings per share beat expectations with double-digit growth from last year, showing an increase of 11% to $1.76, up from $1.58. But, this is down slightly, 3%, from $1.82 in the second quarter.

The consensus EPS forecast for the quarter was $1.67, according to Zacks Investment Research, which is based on eight analysts' forecasts.

“JPMorgan Chase delivered solid results in a competitive environment this quarter with steady core growth across the platform,” JPMorgan Chairman and CEO Jamie Dimon said in a release.

However, this increase was partially offset by a drop in mortgage banking revenue, which decreased a full 17% from last year’s $1.9 billion to $1.6 billion in the third quarter. This is up 9% from the second quarter’s $1.4 billion, which also represents a significant drop from the year before.

The bank explained that this loss was due primarily to lower net servicing revenue, loan spread compression and lower production margins.

But other sectors of the bank are performing well, the bank stated.

“In consumer and community banking, card sales and merchant processing volumes were once again up double digits, while loans and deposits continued to grow strongly,” Dimon said.

“In the corporate and investment bank, we continued to lead our peers in investment banking fees, and treasury services and securities services each generated over $1 billion in revenue,” Dimon added. “Commercial banking again delivered outstanding performance with record revenue as our long-term investments in the business are paying off. Our asset and wealth management business delivered strong results with record net income and AUM this quarter.”

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