JPMorgan Chase & Co. (JPM), the biggest U.S. bank by assets, posted a third-quarter profit that beat analysts' estimates on gains from mortgages and trading.
Net income rose 34 percent to $5.71 billion, or $1.40 a share, from $4.26 billion, or $1.02, a year earlier, the New York-based company said Friday. Earnings compared with an average estimate of $1.20 among 30 analysts surveyed by Bloomberg.
"Normally the third quarter is a little weaker than the second quarter, but we have core trading up 2 percent" industrywide, Moshe Orenbuch, an analyst at Credit Suisse Group AG in New York, said before results were released. "You had a little bit of improvement in the back half of the third quarter, particularly in fixed-income trading."
JPMorgan's wrong-way bet on credit derivatives cost the bank $5.8 billion in the first half of 2012, prompting investigations from U.S. and international authorities. Chief Executive Officer Jamie Dimon, 56, got help restoring investor confidence from government programs that fueled demand for home loans, contributing to the first profit increase in five quarters.
Residential mortgage volume in the U.S. rose about 33 percent to $412 billion in the third quarter from a year earlier, spurred by incentives to refinance, according to estimates by the Mortgage Bankers Association. Corporate bond sales surged 66 percent to $987.3 billion in the three-month period from the same quarter last year, data compiled by Bloomberg show, as the Federal Reserve tried to boost the economy by lowering borrowing costs.
The banking industry has been cutting staff and reducing expenses to mitigate slowing global economic growth and historically low interest rates that have compressed profit margins on lending and yields on investments.
The International Monetary Fund lowered its economic forecasts this week as the euro area's debt crisis intensified. It also warned that global economic growth could be even weaker if officials in the U.S. and Europe fail to address threats to their economies.
The IMF reduced its global growth estimate for 2012 to 3.3 percent from 3.5 percent, the slowest since the 2009 recession, and lowered its projection for next year to 3.5 percent from 3.9 percent. The Washington-based lender now sees "alarmingly high" risks of a steeper slowdown, with a 1-in-6 chance of growth slipping below 2 percent.
JPMorgan has regained more than $41 billion of the $51 billion in market value it lost after Bloomberg News first reported on April 5 that the company had amassed an illiquid book of credit derivatives at its chief investment office in London. Dimon initially dismissed the news as a "tempest in a teapot" when the bank reported first-quarter earnings.
The botched bets spawned a series of management changes and dismissals, beginning with Chief Investment Officer Ina Drew, 56, who retired four days after the loss was disclosed on May 10.
Two senior managers announced plans to depart last week. Irene Tse, who ran the CIO for North America under Drew, told employees she's leaving to start a hedge fund. Former Chief Risk Officer Barry Zubrow, who now runs JPMorgan's lobbying operation, said Oct. 5 that he will retire at year-end.
Chief Financial Officer Douglas Braunstein, 51, may also leave his position and join the firm's investment bank, where he previously led dealmaking, according to a person with direct knowledge of the matter.
Braunstein, who was promoted to CFO in June 2010, is likely to remain in that role through the end of the year, said the person, who requested anonymity because a decision on the move isn't final. The finance chief was passed over for promotion when Dimon elevated Matt Zames, 41, to co-chief operating officer and required Braunstein to report to him instead of Dimon.
The firm also is being probed over the possible gaming of U.S. energy markets and was subpoenaed in global investigations of interest-rate fixing in London.
