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JPMorgan Chase earnings take hit, fall again in mortgage sector

Earnings down from Q3 but significantly higher than 2017

In the fourth quarter of 2018, JPMorgan Chase saw a decline in its earnings from the previous quarter, but still saw an increase from the previous year despite weakening in the mortgage banking sector. 

That being said, the bank reported an annual increase in its net revenue, rising from $24.4 billion in 2017 to $32.5 billion in 2018.

However, after sliding to $27.3 billion in the third quarter, JPMorgan’s revenue slid further in the fourth quarter to $26.8 billion. But this is still up from $25.5 billion in the fourth quarter of 2017. Net income moderately fell, decreasing from the third quarter's $8.4 billion to $7.1 billion in the fourth quarter this year. This is a total earnings per share of $1.98, down from $2.34 in the third quarter but up from $1.07 in Q4 2017.

As CNBC noted, this is the first time in 15 quarters that the bank has missed analysts' profit expectations. 

Although Chase experienced growth in revenue from the previous year, its mortgage banking revenue still took a hit in earnings.

JPMorgan’s home lending sector dropped 8% in revenue to $1.3 billion in the fourth quarter. This is also a decrease from $1.4 billion in the fourth quarter last year. The bank explained this drop was predominantly driven by lower net production revenue on margin compression and lower volumes.

Like several mortgage lenders, the bank laid off 400 employees in its consumer mortgage banking division in 2018.

Chase attributed this decision to a slowdown in areas of the mortgage market. 

JPMorgan Chase Chairman and CEO Jamie Dimon said 2018 was another strong year for Chase, with the firm generating record revenue and net income, even without the impact of tax reform.

“Each line of business grew revenue and net income for the year, while continuing to make significant investments in products, people and technology, demonstrating the power of the platform,” Dimon said. “We grew core loans 7%, in-line with our expectations, while maintaining credit discipline and a fortress balance sheet with significant capital and liquidity.”

But while their mortgage division put a drag on total earnings, Dimon claimed the bank preserved its balance sheet.

“The company maintained its fortress balance sheet, discipline and client focus. Operating from this position of strength allowed us to extend credit and raise capital of $2.3 trillion for U.S. consumers, businesses and institutional clients, while returning $22 billion to shareholders,” Dimon said. 

“The enactment of tax reform in the fourth quarter is a significant positive outcome for the country. U.S. companies will be more competitive globally, which will ultimately benefit all Americans,” Dimon continued. “The cumulative effect of retained and reinvested capital in the U.S. will help grow the economy, ultimately growing jobs and wages. We have always invested, even in difficult times, in our employees, customers and communities, and as a result of the tax plan we will be increasing and accelerating some of these investments.”

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