JP Morgan: pushing hard

JPMorgan can breathe easier - for now. After months of chatter about whether the bank should break up, it delivered a solid first quarter. Revenue of $24.8bn was up 4 per cent from last year, while earnings per share of $1.45 beat expectations by a few pennies. The numbers showed some of the diversified strength that for a long time made Jamie Dimon's company the envy of Wall Street.

Investment banking revenue stole the show in the first quarter. Since the crisis, low volatility in debt and equity markets have made this goose far less golden. But, led by recent turmoil in currency markets, revenue from fixed income, currencies and commodities was up a fifth (adjusting for disposals). Equity trading was up a little more. Underwriting and M&A revenue was mixed. Quarter-over-quarter it fell slightly as even with dealmaking fees strong, the pace of equity and debt offerings slowed.

JPMorgan, though, is still a bank in the traditional sense of lending to businesses and individuals and that part of the group still struggles. Long-term interest rates continue to contract so the spread between funding (eg deposits) and rates charged is narrower than lenders would like. The group's net interest margin fell 7 basis points to 2.07 per cent and loan growth was just one per cent.

Cost cutting helped to ease the pressure. The bank's cost to income ratio fell to 57 per cent from 61 per cent last year. A legal charge of 13 cents per share was smaller than in the past and Mr Dimon himself has admitted that some modest level of legal charges may well be a cost of doing business.

The outlook JPMorgan gave was not especially rosy, although the shares rallied and touched an all-time high. But neither that rally, nor the content of the first quarter numbers, was enough to push JPMorgan's valuation up past 1 times book value. Even after a solid first quarter Mr Dimon still has to convince the doubters that universal banking is working.

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