JPMorgan Beats the Street

JPMorgan Chase(JPM Quote), the nation's third largest bank, reported a 36% gain in first-quarter profits, spurred by its wealth management and credit-card businesses.

In the quarter, the bank earned $3.08 billion, or 86 cents a share, compared to $2.3 billion, or 63 cents a share, in the year-ago period. Net revenue rose 12% to $15.2 billion.

Earnings in the year-ago quarter were weighed down by a hefty after-tax charge of $558 million, or 15 cents a share, stemming from JPMorgan's settlement payout in the WorldCom litigation.

Analysts, as surveyed by Thomson Financial, had predicted the bank would earn 83 cents a share in the quarter on revenue of $15.2 billion.

The current quarter included a $341 million after-tax benefit because of lower-than-expected credit-card bankruptcy losses. But that gain was more than offset by charges stemming from the bank's adoption of new stock-compensation accounting rules and the repositioning of its portfolio of U.S. Treasury investments.

On the revenue front, the big producers in the quarter were the bank's credit-card group, wealth management and traditional investment banking work. Fees from underwriting and corporate advisory work rose 18% to $1.17 billion. Credit-card revenue increased 10% to $1.9 billion. Revenue from wealth management increased 19% to $2.97 billion.

But JPMorgan's quarter also was impacted by the tricky interest rate environment, an issue that has bedeviled many banks the past few quarters.

The bank said mortgage banking fees fell 33% to $241 million, one more sign that rising interest rates have cooled off the once red-hot housing market. Net interest income, meanwhile, fell 3% to $5 billion.

Net interest income is the money a bank generates from its lending and deposit operations. The narrowing of the spread between short- and long-term rates has made it difficult for banks to generate outsized profits from reinvesting customer deposits into higher yielding assets.