JPMorgan posts better-than-expected loan losses in second quarter

In just reported second-quarter results, JPMorgan posted a $2.3 billion benefit from releasing $3 billion in loan loss reserves after the bank took $734 million in charge-offs. In the first quarter, the bank had a $5.2 billion reserve release.

• Earnings per share: $3.78 vs Refinitiv analysts’ expectation of $3.21

• Revenue: $31.4 billion, vs Refinitiv analysts’ expectation of $29.9 billion

Ever since the economic downturn last year, the banking industry set aside tens of billions of dollars for loan losses. However, banks have been releasing reserves as borrowers have performed better than predicted.

“Consumer and wholesale balance sheets remain exceptionally strong as the economic outlook continues to improve,” said CEO Jamie Dimon in a release. “In particular, net charge-offs, down 53%, were better than expected, reflecting the increasingly healthy condition of our customers and clients.”

The banking giant said its decision to release money set aside for loan losses was driven by the improving economic outlook, and it came mostly from retail credit card and mortgage reserves. Although the bank’s fixed income trading produced only $4.1 billion in revenue, slightly below analysts’ $4.16 billion estimates, according to FactSet, investment banking helped offset the drop in revenue. Equities trading generated $2.69 billion in revenue, beating the $2.31 billion estimate.

JPMorgan’s trading revenue was expected to decrease from the year earlier period following the frenzied aftermath of the Feds’ actions to boost markets early last year when the coronavirus pandemic first surfaced.

Dimon said last month that although the bank’s trading revenue will decline from the same period a year ago, investment banking revenue was heading straight for a 20% jump due to growing merger fees.

Shares of JPMorgan have surged 24% this year, topping the 17% rise of the S&P 500 Index.