JPMorgan Chase on Wednesday reported earnings that easily beat expectations, but profit fell 6.7 percent drop as costs to cover possible sour loans to troubled shale oil companies rose and revenue from trading and investment banking declined.
JPMorgan's shares were up 2 percent in premarket trading. (Get the latest quote here.)
The bank's net income fell to $5.52 billion in the first quarter ended March 31, from $5.91 billion a year earlier. On a per-share basis, earnings fell to $1.35 from $1.45.
Total revenue fell 3 percent to $24.08 billion, beating the average estimate of $23.40 billion, while revenue from fixed-income trading — often JPMorgan's most volatile business — fell 13.4 percent to $3.60 billion.
Analysts had expected JPMorgan to report earnings of about $1.26 a share on $23.39 billion in revenue, according to a consensus estimate from Thomson Reuters.‹ Feds reject ‘too big to fail’ plans from 5 big banks JPMorgan cuts 5% of Asia wealth management jobs ›
"This is a perfect example of under promising and over delivering," Vining Sparks bank analyst Marty Mosby told CNBC's "Squawk Box."
JPMorgan indicated the impact of the Federal Reserve's December rate hike on net interest income would be minimal, but the benefit was twice what Vining Sparks expected, he said. Similarly, while fee income for January and February was down year over year, it has ticked up from the end of 2015, he added.
Despite energy sector loan write offs, JPMorgan's broad loan portfolio is not showing deterioration, Mosby said. Overall loan growth is consistent with last year's gains and are more balanced across consumer and commercial lending.
"The consumer businesses continue to grow loans and deposits impressively, attracting deposits faster than the industry," JPM Chairman and CEO Jamie Dimon said in a statement. "The U.S. consumer remains healthy and consumer credit trends are favorable."
JPMorgan had also prepped analysts for a bad print on trading revenues, but the report showed the outcome was not as bad as feared, UBS director of equity research Brennan Hawken told "Squawk Box."
As for expenses, cost-cutting looks more sustainable now that it is occurring in the noncompensation side of JPMorgan's business, rather than the volatile compensation-based operations alone, he added.
Shares of the banking giant have fallen more than 10 percent in 2016. Still, JPMorgan shares are outperforming those of Goldman Sachs, another Dow component, which have fallen nearly 15 percent year to date.
JPM in 2016Source: FactSet
Dimon bought over $25 million of JPMorgan's own stock early in the first quarter.
Earlier Wednesday, Reuters reported that JPMorgan cut 30 jobs, or 5 percent of its headcount, at its Asia wealth management business, according to a source with direct knowledge of the matter, as the U.S. bank sharpens its focus on tapping wealthier clients.JPMorgan's Lebovitz: Yellen's message? 'Relax'
JPMorgan is the first U.S. bank to report results since the Federal Reserve's decision in December to raise interest rates by 0.25 percentage points, the first hike in nearly a decade.
Bank of America and Wells Fargo, the second and third-biggest U.S. banks, report on Thursday.
A slide in commodity and oil prices, a slowdown in China, near-zero interest rates, mounting regulatory costs and hefty capital requirements have set up the banking industry for its worst start to a new year since the 2007-2008 financial crisis.
And while stock market activity picked up in March, that was not enough to make up for weak trading volumes during a volatile January and February.
Investment banking revenue fell 24.5 percent to $1.23 billion, even though JPMorgan topped the global league table with $1.22 billion in fees during the quarter, according to Reuters data.
Industry wide, investment banking fees fell 29 percent in the period, the slowest first quarter since 2009.
Financial stocks were the worst performers in the S&P 500 index in the first three months of 2016, falling 5.6 percent compared with the overall index's rise of 0.8 percent.
JPMorgan's stock fell 10.3 percent in the period — but the shares of its five big U.S. rivals fell by even more.
The bank said its total noninterest expenses fell 7 percent to $13.84 billion, helped by lower legal costs.
Like other U.S. banks, JPMorgan has resorted to aggressive cost controls to underpin earnings over the past several quarters as revenue growth remains sluggish.
— Reuters contributed to this report.
Disclosure: UBS, its affiliates, or subsidiaries have acted as a manager or co-manager in the underwriting or placement of securities ofJPMorgan or one of its affiliates within the last 12 months. UBS and/or its affiliates have received noninvestment banking, nonsecurities related compensation from JPMorgan within the last 12 months.
Correction: This story was revised to correct that first-quarter profit fell 6.7 percent.