Chase Earnings Miss, but 12 Record Quarters in a Row for Wells
Two of the nation's largest banks released their first quarter earnings on Thursday. The results of one outpaced analysts' expectations while the other posted disappointing results. Wells Fargo continued its 2013 winning streak with a 14 percent increase in first quarter earnings while J P Morgan Chase missed estimates by .13 per share, a shortfall of nearly 10 percent.
Wells Fargo reported first quarter net income of $5.89 billion or $1.05 per share compared to earnings in the same period in 2013 of $5.17 billion or .92 cents and fourth quarter figures of $5.6 billion or $1.00 per share. The profits came despite slightly lower revenues than both the previous quarter and a year earlier, $20.6 billion compared to $20.7 billion and $21.3 billion.
The bank said its 12th consecutive record quarter was due in part to continued improvement in credit quality. Net charge-offs were down to $825 million, a reduction of $594 million from the first quarter of 2013. This was a rate of 0.41 annualized compared to 0.72 percent. Non-performing assets were reduced by $4.1 billion or 18 percent. The company released $500 million in reserves because of the continued strong credit performance and improved economic conditions.
Total loans were up $4.2 billion from the fourth quarter to $826.4 billion, which the company attributed to the growth in commercial, auto, and 1-4 family first mortgages more than offsetting a decline in junior residential mortgages and a seasonal decline in credit card loans. Community banking profits were up 31 percent year-over-year and mortgage originations were down 28 percent from that same period to $36 billion.
Chief Financial Officer Tim Sloan said, "we are very pleased with Wells Fargo's performance in the first quarter, particularly in some of the drivers of long term growth; loans, deposits, investments, capital, and credit quality.
Analysts had expected the bank to post profits of .96 per share. While overall results were ahead of that consensus, revenue was down slightly from expectations as were pretax profits and changes in reserve levels.
JP Morgan posted first quarter earnings of $5.3 billion, down 19 percent year-over-year; $1.28 per share again, $1.59. Wall Street had been looking for around $1.40 per share. Revenues were $23.9 billion, 8 percent below that of a year earlier.
The bank blamed its weaker results on a drop in trading revenue but its consumer and community banking revenue was down 1.2 billion or 10 percent to $10.5 billion and mortgage originations were off 68 percent from a year earlier and 27 percent from the previous quarter to a total of $17 billion. Income from the mortgage business was $114 million, a drop of $559 million from a year earlier.
Unlike Wells Fargo, Chase increased its provisions for credit losses, raising the total to $850 million from $617 million in the first quarter of 2013. The bank has paid heavy fines and has been involved in costly settlements over the last year or more. In a conference call the bank said that legal issues would continue but at lower levels than in the past.