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JPMorgan Chase's Strong Q2 Performance and Weaker Outlook

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Part 7
JPMorgan Chase's Strong Q2 Performance and Weaker Outlook PART 7 OF 8

Commercial Banking Kept Helping JPMorgan Chase’s Growth in 2Q17

Middle market and corporates

JPMorgan Chase’s (JPM) commercial banking posted revenues of $2.09 billion in 2Q17, compared to $1.82 billion in 2Q16 and $2.02 billion in 1Q17. The revenue growth was helped by higher middle-market banking, corporate, commercial, and real estate banking offtakes, as well as higher net interest margins. On a year-over-year basis, the commercial banking division saw 12% growth in loan balances to $198 billion, reflecting strong business momentum in the economy across divisions. The growth came mainly from the commercial real estate space, which grew 15%, followed by commercial and industrial growth of 9%.

Commercial Banking Kept Helping JPMorgan Chase&#8217;s Growth in 2Q17

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The commercial banking division’s average client deposits also grew 1% on a year-over-year basis, down 2% on a quarter-over-quarter basis, to $173 billion, reflecting rising consumer and corporate wealth on equities, jobs, and business growth.

Rising returns and net

JPMorgan’s commercial banking posted net income of $902 million in 2Q17, compared to $696 million in 2Q16 and $799 million in 1Q17. The net rose on an expansion of margins, expense management, and release of credit provisions. The division’s expenses rose 8% on a year-over-year basis, however, fell 4% sequentially to $790 million. The division’s overhead ratio fell to 38 from 40 in 2Q16. Provisions saw a benefit of $130 million, driven mainly by releases in the energy space (USO) and helped by stable oil prices and credit growth. Other commercial bankers (XLF)—like Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC)—have also witnessed margin expansion and lower reserves from the energy sector in the recent quarters.

JPMorgan’s marketing push and an improvement in the broad economy have allowed it to record higher credit growth in recent quarters, including in interest-sensitive areas like real estate, reflecting strong business relations.

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