Dimon Says Trade War Could Weigh on Confidence in Second Half

(Bloomberg) -- JPMorgan Chase & Co. said the burgeoning trade war could weigh on business confidence in the second half.

“It's kind of affecting psyche more than it is economics,” Chief Executive Officer Jamie Dimon said Friday on a conference call with journalists. “There are unpredictable outcomes when you start skirmishes like this with major countries. It's a worry -- hopefully it gets resolved.”

Shares of JPMorgan fell as much as 1.6 percent even after the company reported second-quarter results that topped analysts' estimates. Core loans expanded 7 percent in the second quarter and trading revenue jumped 13 percent, surprising analysts who'd been forecasting mediocre results in both businesses.

Read more: QuickTake on the trade war

Volatility returned to stock markets in June as talk of a trade war started to turn from risk to reality, boosting trading results far beyond the bank's forecast at the end of May that revenue would be flat compared with last year. The firm's executives indicated that boost could turn into a headwind.

“As we sit here today it's more a risk than it is an actual influencer, but it could easily become one,” Chief Financial Officer Marianne Lake said on the call.

Loan Growth

JPMorgan's total loans increased to $948 billion, beating the $945 billion average estimate of five analysts surveyed by Bloomberg. Trading revenue rose to $5.41 billion, which surpassed the $4.89 billion estimate, helped by a 24 percent jump in the equities business.

Before the report, analysts had projected the four biggest money-center banks would post loan growth of only about 2 percent from a year earlier. The souring outlook on lending and other businesses has weighed on the companies' stocks. The S&P 500 Financials Index fell for a record 13 straight days in June. It dropped 3.6 percent in the second quarter, the worst performance since the first three months of 2016.

JPMorgan posted net income of $8.3 billion in the three months that ended in June, which was the most the bank has ever earned during a second quarter.

“When you look at the year-on-year comparisons, everything looks excellent,” said Chris Kotowski, an analyst at Oppenheimer & Co. “Despite all the bears' hand-wringing” about having to pay more for deposits, the benefits of rising interest rates are clear, he said.

Higher rates helped boost net interest income by 10 percent from a year earlier to $13.5 billion and enabled the investment bank to boost revenue in its treasury and security services businesses by 12 percent each.

Revenue from investment banking increased 13 percent to $1.95 billion, helped by gains in merger advice and equity-underwriting fees. Analysts had expected revenue at the unit to fall 4 percent.

Shares of JPMorgan fell 0.9 percent to $105.94 at 10:04 a.m. in New York. The stock was little changed this year through Thursday.

Here's a summary of JPMorgan's results:

• Net income rose 18 percent to $8.32 billion, or $2.29 a share, from $7.03 billion, or $1.82, a year earlier. That beat the $2.22 average estimate of 22 analysts surveyed by Bloomberg.
• Non-interest expense increased 8 percent as compensation costs rose 7 percent.
• Net interest margin, the difference between what a bank charges borrowers and pays depositors, fell 2 basis points from the previous three-month period to 2.46 percent.

To contact the reporter on this story: Michelle F. Davis in New York at mdavis194@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson

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