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JPMorgan Chase earnings increase, but reveal slowdown in mortgage sector

Earnings down slightly from Q2 but much higher than 2017

In the third quarter of 2018, JPMorgan Chase saw a decrease in its earnings from the previous quarter, but still managed to increase from the previous year despite a lackluster mortgage banking sector. 

After falling to $27.8 billion in the second quarter, JPMorgan’s revenue slid backwards in the third quarter to $27.3 billion. But this is still up from $25.3 billion in the third quarter of 2017.

Net income moderately increased, rising from the second quarter's $8.3 billion to $8.4 billion in the third quarter this year. This is a total earnings per share of $2.34, up from $1.76 in the third quarter of 2017 and up from $2.29 in the second quarter of 2018.

JPMorgan Chase Chairman and CEO Jamie Dimon attributed the bank’s growth to the strength of the international economy.

“JPMorgan Chase delivered strong results this quarter with top-line growth in each of our businesses, demonstrating the power of our platform,” Dimon said. “The U.S. and the global economy continue to show strength, despite increasing economic and geopolitical uncertainties, which at some point in the future may have negative effects on the economy.”

Although Chase experienced growth in revenue, mortgage banking revenue managed to put a drag on total earnings. 

JPMorgan’s home lending sector moved backwards, dropping 16% in revenue to $1.3 billion in the third quarter. This is also a decrease from $1.6 billion in the third quarter last year. The bank explained this drop was predominantly driven by production margin compression, loan spread and lower net servicing revenue.

Earlier this month, the bank laid off 400 employees in its consumer mortgage banking division, attributing the decision to a slowdown in areas of the mortgage market.

"Our servicing portfolio is performing well, with delinquencies accounting for less than 2% of all loans – a 22% decline from last year. When fewer people are struggling with their mortgages, and more people are using self-service channels, we can adjust staffing. Like all companies, we are making improvements to operate more efficiently and make slight adjustments to resources to best meet the needs of the market," a spokesperson for the company said in an email.

These layoffs are not unique to the industry as banks industrywide continue to downsize to stay afloat.

In this year alone, Movement Mortgage, Wells Fargo and Capital One reduced their ranks, and experts predict this trend will continue.

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