JPMorgan Chase & Co. (JPM:US), the world’s biggest investment bank by revenue, dropped the most in almost a month after warning that a deepening Wall Street trading slump may last through the second quarter.
Shares of the company tumbled as much as 3.4 percent to $53.70 before paring the loss to $54.05 at 9:39 a.m. The slide, which brought the year-to-date decline to 7.3 percent, was the biggest in the 24-company KBW Bank Index. Citigroup Inc. lost 1.5 percent and Bank of America Corp. (BAC:US) fell 1.3 percent.
Fixed-income and equities trading revenue will fall about 20 percent from last year’s second quarter, New York-based JPMorgan said in a regulatory filing after the market closed last week. The firm blamed “a continued challenging environment and lower client activity levels.”
Chief Executive Officer Jamie Dimon, 58, was the first head of a major U.S. bank to warn investors this year that trading was down, saying in February that revenue had fallen 15 percent. A 20 percent slide from the $5.37 billion posted in last year’s second quarter would mean about $4.3 billion from the trading business this period. That would mark the company’s worst first half in trading since the financial crisis.
The division’s actual results will hinge on its performance during remaining months in the quarter, which “can be volatile,” the company said.
Analysts have cited the Federal Reserve’s decision to slow its bond-purchasing program for some of the decline, which eroded first-quarter results at U.S. financial firms including Bank of America (BAC:US) and Goldman Sachs Group Inc.
“We expect that the weakness JPM is experiencing in trading-related revenues will be duplicated at other capital-markets-oriented banks,” Charles Peabody, an analyst at Portales Partners LLC, said today in a research note, referring to the bank by its stock symbol. He singled out Citigroup and Goldman Sachs as most likely to report weak trading results.
Morgan Stanley, which is concentrated more on equities than bonds, was alone in registering a trading increase during the first three months of 2014, though Chief Financial Officer Ruth Porat, 56, said she saw weakness ahead.
“The volumes that we talked a lot about during the first quarter -- lower activity -- we’re continuing to see that really does persist into the second quarter,” Porat said in a Bloomberg Television interview last week.
JPMorgan gave forecasts on other business units. Mortgage banking will post a pretax production loss of $100 million to $150 million in the second quarter, driven by higher interest rates, the bank said. Expenses will be lower than the $59 billion reported last year, according to the forecast.
First-quarter profit (JPM:US) fell 19 percent to $5.27 billion, driven by a 21 percent tumble in fixed-income trading, JPMorgan said April 11.
To contact the reporter on this story: Hugh Son in New York at email@example.com
To contact the editors responsible for this story: Peter Eichenbaum at firstname.lastname@example.org Steve Dickson