PRODUCT PROFILE

Latest Dublin Prices

JP Morgan's profits surge 34pc

Friday, October 12 15:38:34

JPMorgan posted a record quarterly profit today as falling interest rates and a recovering housing market brought big increases in mortgage lending.

The mortgage market, long a drag on bank results, is starting to lift lenders' earnings again, and JPMorgan Chief Executive Jamie Dimon said he was hopeful about the outlook for U.S. residential real estate.

"We believe the housing market has turned the corner," Dimon said in a statement.

JPMorgan suffered only modest losses in the latest quarter from the "London whale" trades that brought it $5.8 billion of losses in the first half of the year, signaling that it is moving on after the scandal. The improving housing market brought the bank a 36 percent increase in mortgage lending revenue in the third quarter.

Analysts expect mortgage lending volume to continue to rise after the Federal Reserve said in September that it would buy up to $40 billion of mortgage bonds every month until the labor market improved materially.

That announcement from the Fed has lowered mortgage rates. According to the Mortgage Bankers Association, applications for home loans jumped 16.6 percent in the week ended Sept. 28 from the week before.

Wells Fargo also benefited from the mortgage bonanza, posting a 22 percent increase in third-quarter profit on Friday.

The Fed's buying program also lifted JPMorgan's profits in fixed-income trading, which rose 33 percent, excluding adjustments for changes in the value of the bank's debt. That increase could bode well for other big investment banks due to report results over the next week, including Goldman Sachs Group Inc and Morgan Stanley.

JPMorgan's third-quarter net income was $5.71 billion, or $1.40 a share, up from $4.26 billion, or $1.02 a share, a year earlier.

Analysts had expected, on average, $1.24 a share, according to surveys by Thomson Reuters I/B/E/S. It was not immediately clear whether the analyst forecast was comparable to the reported results. Profits at JPMorgan's investment bank, excluding accounting adjustments for changes in the value of JPMorgan debt, rose to $1.7 billion from $1.2 billion a year earlier, when the European debt crisis cast a darker shadow over the capital markets.

JPMorgan shares were little changed in morning trading. Through Thursday the shares were up 27 percent this year, almost twice the rise in the Standard and Poor's 500 stock index but about three percentage points less than the KBW Bank stock index.

The bank set aside an additional $684 million, before taxes, in the third quarter to cover legal settlements and judgments. A year earlier, it boosted its legal reserves by $1 billion. (C ) Reuters