Two of the nation’s largest banks kicked off the second-quarter earnings report cycle on Friday, with both JPMorgan Chase and Wells Fargo posting results that beat analysts’ expectations.
JPMorgan Chase, the nation’s largest bank, reported net income of $14.5 billion, or $4.75 per diluted share, up 15% from $12.6 billion, or $4.10 per diluted share, in the first quarter. The results were also a 67% increase from the second quarter of last year.
The results beat analysts’ estimates of $4.37 per diluted share.
The bank attributed $2.4 billion of its net income in the quarter to its acquisition on May 1 of First Republic Bank from the Federal Deposit Insurance Corp. (FDIC), which was appointed receiver after First Republic was closed by the California Department of Financial Protection and Innovation.
JPMorgan Chase said net revenue was $42.4 billion, up 34% from a year earlier, or 21% excluding First Republic. The result also beat analysts’ expectations of $38.96 billion.
Net interest income was $21.9 billion, up 44% year over year, or 38% excluding First Republic, predominantly driven by higher interest rates but partially offset by lower deposit balances, the bank said.
Net revenue from home lending totaled $1 billion, an almost 40% increase from $720 million in the first quarter, but up just 1% from a year earlier, driven by lower net interest income from tighter loan spreads and lower servicing and production revenue, the bank said.
JPMorgan Chase Chairman and CEO Jamie Dimon praised the strong results, noting that nearly “all of our lines of business saw continued growth in the quarter.”
Wells Fargo, which continues to pull back from mortgage origination, also beat analysts’ expectations, reporting net income of $4.94 billion, or $1.25 per diluted share, for the second quarter, down 1% from $4.99 billion, or $1.23 per diluted share, in the first quarter. Analysts had projected earnings of $1.16 per diluted share.
Year over year, net income increased 57%, which the bank attributed in part to a 29% increase in net interest income, due to higher interest rates and higher loan balances. However, net interest income was down 1% from the first quarter.
As the bank continues to exit correspondent lending and reduce servicing, it reported that home lending totaled $847 million in the quarter, down 2% from the first quarter and 13% from a year earlier.
Wells Fargo CEO Charlie Scharf called the results “solid,” saying the bank continues to focus on controlling expenses.
Noninterest expense totaled $12.99 billion in the quarter, down 5% from the first quarter but up 1% from the first quarter of last year. The bank attributed the quarter-over-quarter increase to higher salaries expenses, including higher severance expenses, “as well as higher technology and equipment expense, FDIC assessments, and advertising costs, partially offset by lower operating losses and the impact of efficiency initiatives.”
The increase in severance expenses is related to the bank's reduction of its mortgage origination staff, which has been cut by 37%, CFO Mike Santomassimo said Friday morning during a call with analysts.
“Our company remains strong, and we have significant opportunities to continue to improve how we serve our customers,” Scharf said. “The U.S. economy continues to perform better than many had expected, and although there will likely be continued economic slowing and uncertainty remains, it is quite possible the range of scenarios will narrow over the next few quarters.”
