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JPMorgan Chase Beats by a Mile on Improving Credit (Update 2)

  • JPMorgan Chase reports first-quarter profit of $6.5 billion or $1.59 a share.
  • Net revenue came in at $25.8 billion
  • The consensus estimate among analysts was EPS of $1.39 on revenues of $25.86 billion.

Updated from 9:02 a.m. ET with further management and analyst commentary.

NEW YORK ( TheStreet) -- JPMorgan Chase (JPM - Get Report) on Friday said its first quarter profit rose 33% year-over-year on the back of strong performance across its businesses and improving credit quality in its consumer banking business.

The New York banking giant reported record net income for the first quarter of $6.5 billion or $1.59 per share, compared to $5.69 billion or $1.39 per share in the fourth quarter and $4.92 billion or $1.19 per share in the first quarter of 2012.

Revenue for the first quarter was $25.85 billion, down 3% year-over-year, but up 6% from the fourth quarter. Analysts polled by Thomson Reuters expected earnings of $1.39 per share on revenues of $25.86 billion.

The results included a $656 million reserve release in the company's real estate portfolio and a $500 million reduction in credit card loan loss reserves. These items added 18 cents to earnings per share on a post-tax basis.

Atlantic Equities analyst Richard Staite said in an early note following the results that the earnings beat came from reserve releases and lower legal costs, with revenues mostly in line with forecasts.

The markets were not thrilled with the quality of the beat, with shares slipping 1.4% in early trading.

Chairman and CEO Jamie Dimon was upbeat in his commentary about the outlook for the bank and the economy.

"We are seeing positive signs that the economy is healthy and getting stronger. Housing prices continued to improve and new home purchases are also starting to come back," Dimon said. "We also saw strong performance in our credit card portfolio, with net charge-offs remaining near historic lows, another sign that consumers are healthier and more confident."

Dimon said the bank expects to release more reserves in consumer banking amid improving conditions. But he warned that loan growth was softening as small businesses remained cautious about the recovery and fiscal uncertainty.

First-quarter business banking loan originations were down 19% from the previous quarter and 20% from a year earlier, to $1.2 billion. Total loans declined 1% from the fourth quarter to $728.8 billion, but were up 1% year-over-year.

Investment banking fees rose 4% year-over-year to $1.4 billion. Fixed income and equity trading revenues were both up 50% from a weak fourth quarter, at $4.75 billion and $1.34 billion respectively, but down about 5% each year-on-year.

Analysts at Goldman Sachs had predicted first-quarter fixed income revenues of $4.9 billion and equity trading revenue of $1.5 billion.

Investment banking and capital markets were expected to be mixed bag for money center banks heading into first-quarter earnings season. After a strong start to the year, activity weakened in March amid concerns over Cyprus
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