JPMorgan Chase & Co reported a 17 percent jump in quarterly profit on Thursday, topping analyst expectations as higher interest rates fueled trading activity and helped the largest U.S. bank earn more from lending.
The Federal Reserve's decision to hike rates in March for the second time in three months led investors to reposition portfolios, as did elections in Europe and news about Britain's progress in leaving the European Union. That increased activity boosted first-quarter revenue in JPMorgan's markets-related businesses, particularly fixed-income trading.
The bank also reported growth in loans and deposits and was able to earn more from lending as interest rates ticked higher. However, its pace of loan growth, much like in the broader U.S. banking industry, has slackened recently.
Wells Fargo & Co and Citigroup Inc also reported results on Thursday, with Citi showing similar gains in trading and Wells Fargo hurt by a slowdown in mortgage lending.
Overall, JPMorgan earned $6.4 billion in the first quarter, or $1.65 per share, up from $5.5 billion, or $1.35 per share a year earlier. The bank's total net revenue rose 6 percent to $24.7 billion from $23.2 billion in the year-ago quarter.
Analysts had expected earnings of $1.52 a share, according to Thomson Reuters I/B/E/S.
JPMorgan shares rose 0.5 percent to $85.79 in premarket trading.
JPMorgan's corporate and investment banking division, which includes the trading business, reported a 17 percent rise in revenue to $9.5 billion, the biggest gain among its four major business lines. Weaker advisory fees were more than offset by gains in revenue from underwriting, securitized products, interest rate-related products, prime brokerage and corporate derivatives.
On a conference call with journalists, Chief Financial Officer Marianne Lake said some customers decided to borrow by issuing bonds rather than taking out loans.
Mortgage borrowing was a dark spot in the bank's results, with mortgage fees and loan servicing revenue tumbling 39 percent to $406 million from $667 million. Higher interest rates have dissuaded borrowers from refinancing, and JPMorgan executives had said in February they expected non-interest mortgage revenue to fall throughout the year.
Even so, the bank managed to grow its core book of loans by 9 percent on an annual basis and nearly 1 percent from the prior quarter. Its net interest income, an important measure of profitability that shows the difference between a bank's cost of money and how much it receives for the funds, rose 6 percent.
In a statement, Chief Executive Jamie Dimon said U.S. consumers and businesses are "healthy overall" and that the economy could further improve if the government pursues pro-growth initiatives.
(Reporting by Sweta Singh in Bengaluru and David Henry in New York; Writing by Lauren Tara LaCapra; Editing by Bernadette Baum and Meredith Mazzilli)