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J.P. Morgan Profit Slides, Investors Bullish on Earnings Beat

Anirvan Ghosh

JP Morgan Chase & Co, the biggest U.S. bank by assets, reported second quarter results that beat estimates, as fixed income trading revenue fell less than what analysts expected. However, an 8 percent slide in second quarter earnings shows the bank is still grappling with shrinking  trading and mortgage revenue.

Investors on Stocktwits said beating expectations despite a period of soft trading is still a good show, and that the drop in profit was already an implied detail. Shares were up 4.25% in early morning trading, its highest intraday gain in eight months. According to Stocktwits analytics, investors remain very cautious on the stock, with only 65 percent reporting a positive perception.

Net income dropped 7.9 percent to $5.99 billion, or $1.46 a share, from $6.5 billion, or $1.60 a share, a year earlier. Bank of America Merrill Lynch said in a note that “Given the strength across the board– particularly on the revenue side – we expect shares to trade higher today.”

The results were shadowed by concerns over succession planning at the bank, and the health of CEO Jamie Dimon who was diagnosed with cancer earlier.  Dimon has said his prognosis is excellent and he will be working through his eight-week treatment.

The bank had warned investors in May that a trading slump and weak mortgage results might continue through the second quarter. Fixed income clients are being cautious amid low volatility and the Fed’s move to slow bond purchases. Investors expect the second half of the year to bring better results, and conversations turned bullish on the stock post-opening.

Wells Fargo & Co., the most valuable U.S. bank by market cap, posted second-quarter profit last week that rose 3.8 percent on lower credit costs. Citigroup Inc. said yesterday that net income fell 96 percent as the company agreed to pay the government $7 billion to resolve a mortgage-related probe. Bank of America Corp., the second-biggest U.S. lender by assets, is scheduled to report results tomorrow.

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