JP Morgan Chase & Co faced a drop in profits as the costs to manage troubled oil companies and cover sour loans rose. The revenue from investment banking and trading also reported a decline in its first quarter.
However, it is still surprising that despite the drop in profits, the earnings and revenue of the company beat the lowered expectations of the analysts. On Wednesday, the shares of the bank rose to 2.6% in premarket trading.
JP Morgan Chase & Co is the first bank in the US to reports its profit and loss results. The weakness can be seen as a result of drop in oil and commodity prices. Hefty capital requirements, near zero interest rates and a number of other factors.
Although stock market activity was pretty smooth for the month of March, it did not help the weak trading volumes that resulted in the months of January and February.
Through the banking industry, the fees for investment banking fell by 29% during the first 3 months of 2016. This quarter has been regarded as the slowest since 2009.
The worst performers were the financial stocks which fell 5.6 percent. During the same period, JP Morgan’s stock faced a decline of 10.3 percent, but the relief came when it was seen that the company’s rivals faced even worse declines.
Over the last year, the drop in oil prices has put corporate borrowers at risk. A number of jobs are also threatened due to the bad loans that the banks are challenged with.
According to Jamie Dimon, the Chief Executive of JP Morgan, the consumer in the country remains healthy and so does their credit trends. In the first quarter that ended 31st March, the bank’s net income dropped by 6.7 percent which means its value went down to $5.52 billion. But, the bank was able to beat its average estimate of $1.26 per share as it made $1.35. The average estimate by the analysts for the total revenue was $23.40 billion which the bank beat by keeping it at $24.08 billion. The revenues from the most volatile business of the bank which is fixed income trading suffered a decline or 13.4 percent and its value came down to $3.60 billion.
The mining, gas, metals and oil sectors had an impact on the credit losses which doubled to $1.82 billion. In February, bank executives had announced that they will need to spend a whopping $500 million in provisions to cater for the losses on energy loans.
Over the past couple of years, JP Morgan had implemented cost control measures to underpin earnings just like other banks do.