J.P. Morgan Chase Reports Better Than Expected Earnings, Boosts Dividend

U.S. banking giant J.P. Morgan Chase JPM reported first quarter earnings Friday that beat expectations and shares fell in the pre-market.

Also, the company announced that it is boosting its dividend in the second quarter, increasing its capital redistribution plan to shareholders.

For the first quarter of 2013, J.P. Morgan reported earnings per share of $1.59 vs. the $1.39 estimate of analysts. Revenue was slightly weaker than expected at $25.12 billion as compared to forecasts of $25.94 billion. Also, the company announced a 27 percent increase in the dividend to $0.38 per share.

Diving into the many businesses of J.P. Morgan, the company reported that consumer and community banking deposits rose 10 percent while mortgage originations were up 37 percent to $52.7 billion and credit card sales volume gained nine percent. The investment banking division retained its number one global ranking by fees and increased assets under custody by eight percent to $19.3 trillion. The asset management division also saw a sixteenth consecutive quarter of net inflows.

Alongside the dividend increase, the board of directors also announced that the company had purchased $2.6 billion in stock in the first quarter of 2013. Also, the board authorized an additional $6 billion in buybacks through the first quarter of 2014.

CEO Jamie Dimon pointed out that the fortress balance sheet became even stronger in the first quarter as the company's Basel I Tier 1 Capital Ratio was 10.2 percent. Under the new Basel III requirements, its capital ratio falls to 8.9 percent, which is still an increase from the previous quarter's 8.7 percent. The bank also has high quality liquid assets of $413 billion.

The bank did note that total earnings were boosted by a $650 million pre-tax benefit from reduced mortgage loan-loss reserves and $500 million from reduced credit card loan-loss reserves. On a per share basis, these one-time items represented a $0.18 after-tax benefit to shareholders.

Jamie Dimon, Chairman and Chief Executive Officer, commented on the financial results: "JPMorgan Chase had a very good start to the year. All our businesses had strong performance, and our client franchises did exceptionally well. The Corporate & Investment Bank was #1 in fees, global debt and equity, syndicated loans, and announced M&A. Those leadership positions reflect the volume of business we do with clients and it is a great result."

"Consumer & Community Banking deposits were up 10% compared with the prior year," he continued, "client investment assets were up 15%, and mortgage loan originations were up 37%. Asset Management also had strong performance with loan balances up 27% compared with the prior year. Assets under supervision were up 8% to $2.2 trillion. This business achieved a record $31 billion of net long-term client flows for the first quarter."

"We are seeing positive signs that the economy is healthy and getting stronger. Housing prices continued to improve and new home purchases are also starting to come back. We also saw strong performance in our credit card portfolio, with net charge-offs remaining near historic lows, another sign that consumers are healthier and more confident. As a result, we reduced the allowance for loan losses in Consumer & Community Banking in the first quarter by a total of $1.2 billion and are likely to see further releases. Credit conditions were also favorable across the wholesale loan portfolios."

Dimon added: "The exception is that loan growth across the industry has been softer this quarter, although year-on-year growth remained strong. Small businesses remain cautious about the recovery and fiscal uncertainty, and are not investing their capital. However, companies' balance sheets are much stronger than they were before the financial crisis and small businesses remain well positioned to invest in growth once they decide to. With approximately 2 million small business customers, Chase remains the nation's #1 Small Business Administration lender and we plan to serve more customers when loan demand comes back."

Dimon concluded: "We are very pleased with our first-quarter results, are proud of our accomplishments and remain optimistic about the future."

J.P. Morgan shares traded lower in the pre-market to $49.09 from Thursday's close of $49.31. Markets now eye further bank earnings from Wells Fargo WFC, due out at 8:30 am eastern.