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Mixed earnings at large US banks as Fed rate cut looms

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"We continue to see positive momentum with the US consumer - healthy confidence levels, solid job creation and rising wages," says JPMorgan Chase CEO Jamie Dimon.

New York

JPMORGAN Chase reported record quarterly profits on Tuesday behind strong consumer business, but shares were pressured by worries over expected Federal Reserve interest rate cuts on a day of mixed results by large banks.

Wells Fargo also notched higher profits, while Goldman Sachs reported a dip in profits, but topped analyst expectations.

The trio of results moved markets into the heart of the second-quarter earnings season, which comes against a backdrop of uncertainty over international trade and an anticipated loosening of monetary policy, with the Fed expected to cut interest rates later this month.

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Lower interest rates are generally viewed as a drag for large banks because it reduces the net interest income of financial companies - the difference between the interest rates it charges consumers for loans and the interest it must pay for deposits.

At JPMorgan, key areas of strength included consumer banking, where it scored from higher net interest income. JPMorgan also generated increased revenues connected to the credit card business and higher auto loans and lease originations. Net profit came in at US$9.7 billion, up 16.1 per cent and a company record. Revenues were up 4.1 per cent at US$29.6 billion.

Chief executive Jamie Dimon offered an upbeat appraisal of the US economy. "We continue to see positive momentum with the US consumer - healthy confidence levels, solid job creation and rising wages - which are reflected in our Consumer & Community Banking results," he said.

But shares were choppy after the report, with analysts pointing to the bank's forecast for US$57.5 billion in 2019 net interest income, down from the prior US$58 billion forecast. The decline reflects the expected hit from Fed actions to cut rates.

At Wells Fargo, net income rose 19.7 per cent to US$6.2 billion, while revenues were essentially flat at US$21.6 billion.

Wells Fargo experienced a dip in net interest income but that was largely offset by other gains, such as higher service charges on deposit accounts and lower non-interest expenses. Results in the year-ago period were hit by a large one-time tax expense.

"In second quarter 2019, we recorded strong earnings and continued to make progress on our top priorities: focusing on our customers and team members; meeting the expectations of our regulators; and continuing the important transformation of our company," said interim chief executive Allen Parker.

At Goldman Sachs, net income was US$2.2 billion, down 6.4 per cent from the year-ago period. Revenues dropped 1.8 per cent to US$9.5 billion.

Goldman suffered from a decline in fixed income, currency and commodity trading, a weakness at other large banks. Financial advisory revenues also fell due to lower merger and acquisition activity compared with the year-ago period. Debt underwriting revenue also fell.

"We're encouraged by the results for the first half of the year as we continue to invest in new businesses and growth to serve a broader array of clients," chief executive David Solomon said in a statement.

"Given the strength of our client franchise, we are well positioned to benefit from a growing global economy."

Shares in JPMorgan fell 0.1 per cent to US$113.83 in early trading. Wells Fargo rose 0.3 per cent to US$46.84, while Goldman Sachs rose 2.1 per cent to US$215.97. AFP