A view of the exterior of the JP Morgan Chase& Co. Corporate headquarters in the Manhattan borough of New York City, May 20, 2015. Four major banks agreed to plead guilty on Wednesday to trying to manipulate foreign exchange rates and six were fined nearly $6 billion in yet another settlement in a global probe into the $5-trillion-a-day market. Authorities in the United States and Britain accused traders at Citigroup, JP Morgan, Barclays, UBS and Royal Bank of Scotland of brazenly cheating their clients to boost their own profits using invitation-only chat rooms and coded language to coordinate their trades. REUTERS/Mike Segar
New York (Reuters) – Major U.S. banks delivered sobering results to kick off the earnings season.
Industry leader JP Morgan was able to increase profits in the second quarter by five percent to 6.3 billion dollars, once again outshining its European competitors. But this was by no means thanks to gains in the day-to-day business. On the contrary, the important bond trading went rather badly than well due to the uncertainty on the markets. What helped was a tough look at costs, as chief executive Jamie Dimon explained on Tuesday. At Wells Fargo, the largest U.S. mortgage lender, this did not work out. Here the profit shrank for the second time in a row, even if only slightly.
Investors on the stock market reacted in a huff: Shares of JP Morgan and Wells Fargo were treading water in early trading on Wall Street. These are bad omens for Deutsche Bank, which is similarly positioned in investment banking to JP Morgan and reported its interim results on 30. July wants to present. With excitement, however, are first expected the figures of the remaining U.S. houses, which come in the next few days: Bank of America, Citigroup, Goldman Sachs and Morgan Stanley.
Dimon was satisfied with the overall result. JP Morgan had made progress in becoming leaner and bolstering capital. Quarterly profit was above analysts' expectations because the bank had to fork out less money for litigation than feared. With a return of 14 percent, JP Morgan is now close to its 15 percent target.
GREECE SPOILS THE MOOD
But there were also shadows in the balance sheet. Group income fell slightly as follows. In the important trading of fixed-income securities, they even fell by a good fifth. Excluding special effects such as the sale of individual businesses, the loss would still have been ten percent. This does not come as a complete surprise: Many investors remained on the sidelines, especially in June, because they were uncertain about the outcome of the Greek debt drama and whether the U.S. Federal Reserve would actually turn around interest rates before the end of the year.[ID:nL8N0ZQ342] Dimon said it was important that Greece and its European partners find a "reasonable" solution. JP Morgan fared better in equities trading and asset management.
The fact that the mortgage business is weakening in the important home market was felt by both JP Morgan and Wells Fargo. Many families took advantage of years of low interest rates some time ago, now not much is happening. The "pipeline" of new mortgage applications is manageable, complains the industry. Both major banks will also have to set aside more money for bad loans again. At Wells Fargo, all this led to a drop in profits in the past quarter: net income shrank slightly to 5.4 billion dollars.