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What a difference a quarter makes for JPMorgan Chase’s Jamie Dimon.
The bank boss bounced back from the “London Whale” trading debacle with record quarterly profits, buoyed by historically low interest rates and a surge in mortgage refinancing.
The housing market drove a 34 percent jump in the bank’s third-quarter profit, to $5.7 billion. Per-share earnings of $1.40 beat analysts’ estimates by 20 cents.
The results came nearly six months after Dimon sullied his once pristine image on wrong-way derivatives bets, which he coolly dismissed as a “tempest in a teapot” before they blew a $6 billion-plus hole in the bank’s balance sheet.
Dimon, speaking on a conference call to discuss performance, referred to losses in the latest quarter from the remnants of the trade as “modest.” The bank took a third-quarter hit of $449 million, bringing the total losses to $6.2 billion.
Dimon’s resurgence came the same day that Wells Fargo also rode home loans to record third-quarter profits of $4.9 billion, or 88 cents a share.
The results modestly beat Wall Street’s profit expectations on the back of a behemoth mortgage engine that churned out $139 billion in home loans, up 7 percent from the second quarter.
The nation’s runaway mortgage leader, Wells underwrites 1 in every 3 loans in the nation.
The banks are benefiting from the government’s Home Affordable Refinance Program and the Federal Reserve’s efforts to drive rates lower through monetary easing.
The pair accounted for more than 40 percent of the estimated $450 billion in home loan originations in the third quarter, according to trade publication Inside Mortgage Finance.
Meanwhile, the average fixed-rate, 30-year home loan carried a rate of 3.38 percent, according to Bankrate.com.
“We believe the housing market has turned the corner,” Dimon said yesterday.
Wells Fargo CFO Tim Sloan agreed.
“We do believe that we’ve seen a turn,” he noted during a call to discuss the bank’s results.
“All in, we think it’s a good quarter for JPM and other banks should see similar benefits,” said Nomura Securities bank analyst Glen Schorr in a note to clients.
That said, Wall Street fretted about the quality of bank results.
Some worried that refis at rock-bottom rates, rather than fundamental improvement in the housing market, boosted performance.
Shares of JPMorgan closed down 1.14 percent to $41.62, with some investors taking profits after the firm’s recent post- “Whale” run-up.
Wells shares fell 2.64 percent to $34.25, as investors worried that lower rates would eventually eat into bank profits when refinancings peter out.