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July 14 (Reuters) - Three of the six biggest U.S. banks kicked off the earnings season on Friday, reporting profits that topped Street estimates but failed to enthuse investors who were looking for better results and sunnier outlook.
Although the banks started to see some long-awaited benefits of higher interest rates, most warned of a slowdown in mortgage lending.
"Mortgage banking will continue to be weak, relative to year-ago periods, largely driven by the fact that interest rates are moving higher and less people are refinancing their homes," said Shannon Stemm, an analyst with Edward Jones.
"That is a trend that's going to continue."
A snapshot of the earnings of the three banks that reported on Friday:
JPMorgan Chase & Co
* Earnings (beat) - EPS $1.71 vs est. $1.58
* Revenue (beat) - $26.41 bln vs est $24.96 bln
* Story - reut.rs/2tR3ISH
* Helped by: - Lower provisions for credit losses, down 13.3 pct to $1.22 bln - Loan growth; average core loan book grew 8 percent vs year earlier
* Hurt by: - Slump in mortgage banking income, down 26 percent - Jump in expenses, up 6.4 percent - Drop in markets revenue, falls 14 percent, led by 19 percent decrease in fixed-income markets revenue
* Forecast: - Smaller FY net interest income, +$4 bln vs +$4.5 bln forecast previously - FY 2017 average core loan growth to be about 8 pct vs 10 pct estimated earlier - Expects credit card loss rates to go up as company makes more loans
* Comment: - Interest rate movements "a tale of two cities," in which Wall Street businesses change quickly, but Main Street customers are not yet demanding more money for their deposits - Chief Financial Officer Marianne Lake Wells Fargo & Co:
* Earnings (beat) - EPS $1.07 vs est. $1.01
* Revenue (missed) - $22.16 bln vs est. $22.47 bln
* Story - reut.rs/2tRfooM
* Helped by:- Steep drop in provisions for credit losses, nearly halves to $555 million - Rise in net interest income, up 6.4 percent
* Hurt by:- Slump in mortgage banking income, down 18.8 percent- Higher expenses, up about 5 percent
* Forecast:- Expects litigation costs to rise by up to $1.3 billion at higher end of range - CFO- Auto loans to continue to decline in 2nd half - CFO- Mortgage income likely to be 'volatile' ahead due to more competition - CFO
* Comments:- "EPS looks a tad light as a lower-than-expected loan loss provision and tax rate was used to help offset weaker-than-expected fee income" - Jason Goldberg, Managing Director from Barclays Citigroup:
* Earnings (beat) - EPS $1.28 vs est. $1.21
* Revenue (beat) - $17.90 bln vs est. $17.37 billion
* Story - reut.rs/2tQVfPr
* Helped by:- Drop in trading revenue smaller than lender's forecast, 7 percent vs 12 percent decline projected by company- Growth in loans, up 2 percent
* Hurt by:- Rise in operating expense, up 1.3 percent- Declines in fixed income and equity trading revenues; fixed-income slips 6 percent, equity falls 11 percent
* Forecast:- We feel very good about meeting targets for return on equity - CEO Mike Corbat
* Comments:- "We are still hopeful that we will get some solid changes to boost economy" - Chief Financial Officer John Gerspach
Goldman Sachs, Morgan Stanley and Bank of America are scheduled to report quarterly earnings next week.
Reporting By Aparajita Saxena and Nikhil Subba in Bengaluru; Editing by Sriraj Kalluvila