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Shares Of JP Morgan Dip On Net Interest Income View, Posts Higher Profit

Shares Of JP Morgan Dip On Net Interest Income View, Posts Higher Profit
Riding on a strong loan growth and higher interest rates, JPMorgan Chase & Co reported a better-than-expected quarterly profit. However, its shares went down after the bank said that the net interest income for the year would be lower than expected.
Auto loans, an area where some lenders have been pulling back, saw the bank's borrowing business increase apart from sectors such as mortgages, business loans and credit cards.
But, rather than a $4.5 billion estimate given in April, net interest income for the full year would increase by $4 billion, said Chief Financial Officer Marianne Lake on a call with analysts. Lake said that a change in the alignment of interest rates and mortgage adjustments were the reasons for this. 
Overall, from $6.2 billion, or $1.55 per share, in the year-ago quarter, JPMorgan's net income rose 13 percent to $7.03 billion, or $1.82 per share.
compared with the same period a year earlier, there was a growth of 8 percent in the second quarter for the JPMorgan's average core loan book which also helped in driving the above sector. More money on these loans was earned by JP Morgan due to the higher rates of interest.
And topping the average analyst estimate of $1.58, according to Thomson Reuters I/B/E/S, the bank earned $1.71 per share, excluding a gain from a legal settlement.
During the trade on the last day of the week, the stock was down 1.7 percent at $91.55 in morning trade.
In the month of June, there was a second raise in the rates of interest this year by the U.S. Federal Reserve. The banks are able to increase how much they charge for loans faster than they boost how much they pay for deposits when there is a rise in rates of interests and there such rise is helpful to banks.
While Main Street customers are not yet demanding more money for their deposits, Chief Financial Officer Marianne Lake called rate movements "a tale of two cities," in which Wall Street businesses change quickly.
"While there have been changes in the industry and CDs, there's been nothing in checking or savings," said Lake.
She said that in December of this year, the bank expects the Fed to hike rates again.
JP Morgan has also set aside more money for borrowers who do not repay their debts, as its loan book has expanded.
Noting an increase from both the prior and year-ago periods, and as the charge-off rate ticked above 3 percent, the bank built loan-loss reserves by $252 million in credit cards, where it has been growing aggressively.
As the company makes more loans, investors have been to expect credit card loss rates to go up by JPMorgan executives. Gordon Smith, head of consumer banking, said at an investor conference in June that on newer card accounts, the bank sees charge-off rates of about 4.5 percent.
And as volatility hit multi-year lows, trading revenue was a dark spot for JPMorgan. But because the year-ago quarter benefited from a surge in trading around the UK's Brexit vote, executives across Wall Street have been warning investors to look for declines.
Primarily due to fixed income trading, JPMorgan's markets revenue dropped 14 percent to $3.22 billion. It was the first decline in five quarters.
Results were also reported by Wells Fargo and Co and Citigroup Inc.

Christopher J. Mitchell

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