J.P. Morgan Chase Sees Lower Loan Servicing Revenue

Net income in the second quarter for the retail financial services unit of J.P. Morgan Chase & Co. here was off by 11% from the previous year as mortgage banking income fell by $131 million and ended up as a loss for the period.

The bank holding company said its retail financial services unit posted net income of $868 million, down $112 million from $980 million in the second quarter 2005.

In mortgage banking, J.P. Morgan Chase lost $7 million in the quarter, compared with net income of $124 million in the prior year.

Net revenue fell to $318 million, down $186 million. Production revenue actually increased by $58 million to $202 million, reflecting higher gain-on-sale margins.

But this was cancelled out by a $244 million decline in net servicing revenue to $116 million.

The company took a $55 million loss on mortgage servicing rights risk management, a decline of $68 million in other changes in MSR fair value, offset by an increase in loan servicing revenue of $46 million because of a 14% increase in third-party loans serviced.

Loan originations for the quarter were $36.5 billion, up 26% from the first quarter and 17% from the second quarter 2005. Total third-party loans serviced were $497 billion, compared with $438 billion one year prior.

Home-equity loan originations were $14 billion for the quarter, down 11% from the prior year, but up 20% over the prior quarter. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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