JPMorgan Chase: Margin Loser

NEW YORK ( TheStreet) - JPMorgan Chase ( JPM) was the loser among large U.S. banks on Friday, with shares down slightly to close at $54.97.

The KBW Bank Index ( I:BKX) was up over 1% to close at 64.49, with all 24 index components showing gains, except for JPMorgan.

JPMorgan Chase kicked off large-cap U.S. bank earnings season, reporting what Jim Cramer on CNBC called a "fabulous quarter." The nation's largest bank holding company by assets reported second-quarter earnings of $6.50 billion, or $1.60 a share, compared to $6.52 billion, or $1.59 a share, in the first quarter and $4.96 billion, or $1.22 per share, during the second quarter or 2012.

JPMorgan's earnings came in ahead of the consensus estimate of $1.44 a share among analysts polled by Thomson Reuters. With stronger-than-expected trading revenues, the company reported total second-quarter revenue of $25.95 billion, ahead of the consensus estimate of $24.84 billion.

Investors were likely disappointed that JPMorgan Chase's core net interest margin declined to 2.20% during the second quarter from 2.37% the previous quarter and 2.47% a year earlier. The company did say in its outlook for the second half of 2013 that the margin was expected to "relatively stable in the second half of 2013."

The recent rise in long-term rates should help the margin over the long term, and JPMorgan also said it expected its net interest income "to be modestly up" in the third quarter from the second quarter.

Wells Fargo ( WFC) also reported its second-quarter results on Friday morning, with its fourteenth consecutive profit increase.

Unlike JPMorgan Chase, which reported a 7% sequential decline in mortgage origination volume, Wells Fargo reported a slight increase in new mortgage lending during the second quarter.

During an interview on CNBC, Cramer took JPMorgan CEO James Dimon to task over the bank's apparent inability to compete in the mortgage space with Wells Fargo.

Referring to Wells Fargo CEO John Stumpf, Cramer asked Dimon "Is he just out-mortgaging you?"

Dimon said "Yes he is. I love John Stumpf, they do a better job in the mortgage business than us," but added that following the acquisitions of Bear Stearns and the failed Washington Mutual, "our systems weren't great." Dimon went on to say "we have a new management team in place, and at the end of the day we're going to have a great mortgage business."

"We believe like John that it is an important product... We are really good at production, we are really good at servicing, we just have more wood to chop than he does," Dimon said.

"We've gone from 9% to 10% to 11%" mortgage market share, Dimon said, adding that "I think you'll see our share go up over time."

JPMorgan also disclosed an estimated supplementary Basel III Tier 1 leverage ratio of 4.7% as of June 30. Under new rules proposed on Tuesday by the Federal Reserve, the Office of the Comptroller of the Currency and the FDIC, large U.S. bank holding companies will be required to maintain supplementary Basel III Tier 1 leverage ratios of at least 5%.

JPMorgan Chase said that by "holding capital distributions flat" through 2014, it would generate 60 basis points in additional Basel III Tier 1 leverage capital, putting it in compliance with the new supplementary leverage ratio requirement three years ahead of the due date and before the phase-in period even begins.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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