What Really Drove J.P. Morgan’s Profits in 1Q17?
Consumer and Community Banking
JPMorgan Chase’s (JPM) Consumer and Community Banking division posted net income of $2.0 billion in 1Q17, as compared to $2.5 billion in 1Q16, mainly due to lower mortgage banking, commerce solutions, and auto.
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In 1Q17, the Consumer and Community division managed net revenues of $11 billion, which represents a 1% YoY (year-over-year) fall. The division saw higher deposit growth, propelling an 8% rise in revenues.
However, its mortgage banking fell 18% in revenues mainly due to lower net servicing revenue. The division saw a 5% rise in expenses, mainly due to higher auto lease depreciation and business growth. The increase in provisions for credit losses of $380 million led to a major decline in net profits. These provisions increased due to a write-down in its student loan portfolio.
Corporate and Investment Banking
In 1Q17, J.P. Morgan continued to see higher investment banking and trading revenues. This division posted a net income of ~$3.2 billion, as compared to $1.98 billion one year previously, helped by lower provisions and rise in revenues.
Its revenues rose 17% to $9.5 billion, fueled by a 25% rise in banking and a 34% rise in investment banking revenues. The division saw higher underwriting fees, treasury revenues, lending revenues, and lower mark-to-market losses on hedges.
The rising broader market (SPX-INDEX) (SPY) resulted in improved liquidity, increased fund-raising, and strategic transactions, resulting in higher investment banking fees for major bankers like J.P. Morgan, Goldman Sachs (GS), Bank of America (BAC), and Morgan Stanley (MS).