JPMorgan Chase Opened Earnings Season Friday

JPMorgan Chase & Co posted a quarterly profit that was better than had been expected due to strong growth in loans and interest rates that were higher, but announced that net interest income would be lower than had been expected which in turn sent shares down over 2%.

The borrowing business for the bank increased in areas such as residential mortgages, credit cards, business loans and auto loans, which is one area some lenders pulled back on.

However, during a call with Wall Street analysts, CFO Marianne Lake said that net interest income for the full 2017 year would expand by over $4 billion and not $4.5 billion that had been estimated during April. That was due to adjustments on mortgages and a change in interest rate alignment, said Lake.

Overall net income at JPMorgan increased by 13% to end the quarter at $7.02 billion equal to $1.82 a share compared to $6.2 billion equal to $1.55 a share for the same quarter one year ago.

This was due to the average core loan book that grew 8% during the quarter compared to the same three-month period one year earlier.

Higher rates of interest helped the bank earn more on those loans.

Excluding the gain the bank made on a legal settlement, JPMorgan earnings per share were $1.71 which topped the estimates on Wall Street of $1.58.

The Federal Reserve increased its interest rates in June for the second time in 2017. Rising interest rates are most of the time good for all banks, allowing them to lift their interest rates on loans they give to customers faster than they increase the amount they pay for their deposits.

CFO Lake said the rate movements were double-sided as businesses adjust quickly but customers on Main Street are not demanding yet that they want higher rates for their deposits.

JPMorgan said it expects that the Fed will raise its rates again during December.

As the bank’s loan book has grown, it has also had to set aside additional monies for borrowers that do not pay their debts.

The bank has been growing very aggressively in its credit cards department, but that means the rate of charge offs increased and during the quarter was bumped up to 3% and loan loss reserves were increased by $252 million.

Executives at the bank told investors that the loss rates for credit cards would increase as the bank makes more of these loans. For newer credit card accounts, the bank sees rated of approximately 4.5% for charge offs.