Updated with additional details in second and seventh paragraphs.
NEW YORK (TheStreet) -- Bank earnings are complicated, but it's important not to lose the forest for the trees. Wells Fargo (WFC) grew its earnings; JPMorgan Chase (JPM) did not. Which do you think is the better performer?
It isn't a trick question. JPMorgan on Friday attributed its 18% first quarter earnings decline to "industry-wide headwinds in markets and mortgage." Fine--except that Wells Fargo is in the same industry and managed to grow its earnings by 14%. And it's not as though Wells Fargo looks good this quarter because it is coming off a poor prior performance. Wells posted higher net income than any other bank in the U.S. in 2013 and has grown earnings for 17 straight quarters.
Even though residential mortgage originations fell slightly at Wells Fargo compared to the fourth quarter, the San Francisco-based bank managed to more than offset the decline by fees from mortgage servicing.
The market understood that JPMorgan was riskier than Wells Fargo going into Friday's earnings, and on Friday it is charging an ever higher price for the relative stability of Wells. Wells trades at about 1.6 times book value versus 1.1 times book for JPMorgan. Part of that discount is attributable to JPMorgan's riskier "business model." It still takes more market risk even though the Volcker rule is supposed to reduce such risk-taking. Also, JPMorgan has a much larger presence outside the U.S.
But when it comes to which bank is better at delivering consistent profits, there can be little debate: one bank has excuses, the other has results.
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