NEW YORK -- Analysts looking to big-bank earnings as a sign of the health of the economy got good news Friday as JP Morgan Chase and Wells Fargo, two of the nation’s biggest financial institutions, posted good second-quarter earnings, despite worries that the economic recovery is too slow.
JP Morgan beat analysts’ expectations, reporting a 31% increase in profits, as net income grew to $6.5 billion, from $4.96 billion a year ago. That translates to earnings of $1.60 per share, which beat the $1.45 that analysts had been expecting.
The company said it saw strength in customer and community banking -- with deposits up 10% -- as well as a 12% growth in mortgages and a record volume of credit card sales.
JP Morgan’s investment bank and asset management divisions were also growing. Client assets in the quarter were $2.2 trillion. The company saw some softness in loan growth, Chief Executive Jamie Dimon said in a statement.
“However, we continue to see broad-based signs that the U.S. economy is improving and we are hopeful that, as jobs are added and confidence builds, the U.S. economy will strengthen over time,” Dimon said.
Wells Fargo, the nation’s largest mortgage lender, posted income of $5.5 billion, up 19% from a year ago. The company’s earnings of 98 cents per share beat the 92 cents analysts had been expecting.
“Wells Fargo again demonstrated an ability to grow during a dynamic economic and interest rate environment, and we feel very well positioned to continue to perform for our shareholders over the long term,” Chief Executive John Stumpf said in a statement.
Some analysts are concerned that banks’ performance will turn sluggish as the Federal Reserve ends its $80-billion-a-month bond buyback program aimed at stimulating the economy. Tapering the program could weaken earnings as banks have fewer buyers for their loans and other products, and as interest rates rise.
New home loans fell after Fed Chairman Ben S. Bernanke spoke publicly about the end of the program. A July 10 report from the Mortgage Bankers Assn said that mortgage applications had decreased 4% from the same period a year earlier.
Interest rates are continuing to climb, reaching their highest point in two years, according to Mike Fratantoni, the association’s vice president of research and economics. Climbing rates make people less interested in refinancing their loans, although people are continuing to buy homes.
Still, banks have been among the strongest performers in the stock market this year. Brokerage firm Sterne Agee estimates that banks’ profits will rise 7% to 10% in the second quarter, down from 10% to 20% annual gains in the first quarter.