NEW YORK--(BUSINESS WIRE)--JPMorgan Chase & Co. (JPM) reported stable second quarter 2015 (2Q15) results, with net income up 5% year-over-year, and up 6% from the prior quarter, driven primarily by lower legal expenses and stable revenues across most business segments. Core loans grew 12% from the prior year and 5% sequentially. Overall, Fitch Ratings believes JPM's performance continues to benefit from the firm's diverse business segments.
The corporate and investment bank (CIB) saw a sequential quarterly decline in net revenues and net income, although a 10% improvement in net income from the prior year. Weaker results in CIB were largely a result of a decline in fixed income markets, which were down 10% year-over-year. Investment banking revenue was up 4% from 2Q14. CIB average VaR was $43 million for the quarter, flat from 1Q15. The firm did make changes to its VaR models which had its most significant impact on the CIB business and fixed income in particular. The change related to its proxy time series and, according to the firm's disclosure, if the change had been implemented in 1Q15, fixed income VaR would have been lower by about 10%. Expenses were down 15% from 2Q14 due to lower legal expense, business simplification and lower compensation expense.
Consumer & Community Banking (CCB) saw some quarterly net revenue improvement but was down 4% over the prior year, though net income improved 1% from 2Q14 and 14% over the prior quarter. Higher MSR revenue and seasonally higher card and debt volume helped results in CCB. The segment overhead ratio was 68% for the quarter, slightly up from a year ago and flat sequentially. The business continues to progress towards its goal of reducing expenses by $2 billion by the end of 2017, having met about a quarter of its goal through the first half of 2015.
Mortgage production remained generally in-line with market trends and JPM maintained its market share in the space, with origination volume up 19% sequentially. The firm added about $19 billion of high-quality loans to the balance sheet in the quarter. Mortgage servicing revenue reversed its trend with higher revenue, but non-interest revenue is down year-over-year and is expected to be down for the year. Segment expenses continued to improve as expected as the firm continues to manage costs. Credit trends in the real estate portfolio remained strong, with non-PCI losses of 0.21% in the quarter; down 9 basis points sequentially. JPM released about $300 million of reserves in the non-credit-impaired portfolio.
The card segment improved modestly with higher non-interest revenue, slightly improved credit costs and relatively flat non-interest expenses. Average card loans were up about 1% year-over-year, and flat sequentially. Card sales volume was up 7% from 2Q14, and 11% from 1Q15 due to seasonality. Fitch believes JPM's sales volume is likely to continue to be at the high-end of the peer group. Credit performance remained pristine, with card net charge-offs and early stage delinquencies declining sequentially. Provision expense was also down year-over-year. Despite the fact that Fitch believes credit metrics to be at unsustainable lows, management expects further improvements in card losses.
Commercial Banking (CB) remains a steady contributor to JPM earnings. Segment performance was down from 2Q14, with flat revenue, slightly higher expenses, and higher credit costs. Revenues benefited from a large investment banking transaction. Credit costs were up $249 million year-over-year due largely to another $187 million reserve build mostly related to oil & gas exposures. Portfolio performance remains in-line with expectations overall.
Asset management saw net revenue improvement of 6% from the sequential quarter and from 2Q14. However, expense growth in the segment exceeded the revenue gains, partly due to legal expenses and a loss from a held-for-sale asset. Assets under management (AUM) were a record $1.8 trillion at quarter-end and net inflows continued.
From a liquidity perspective, JPM's high quality liquid assets (HQLA) HQLA declined to $532, a decline of 15% sequentially, though the firm remains liquidity coverage ratio (LCR) compliant. It also reduced its balance sheet year-to-date by about $123 billion and reduced non-operating deposits by $104 billion, meeting its target ahead of schedule. Ending deposits declined by about $76 billion relative to YE2014, with $28 billion of growth in retail deposits (in CCB). Fitch views this shift favorably, given the relative stability of retail deposits and favorable treatment in liquidity ratios.
JPM's Basel III Tier 1 Common equity (CET1) ratio rose 40 basis points sequentially, to 11%, right in line with its year-end target of 11%. The supplementary leverage ratio (SLR) grew 30 basis points at the firm level and 10 basis points at the bank level, to reach 6.0% and 6.1%, respectively, at 2Q15. Fitch regards JPM's capital levels to be consistent with its current ratings and would expect the bank to achieve full compliance with all regulatory requirements, well ahead of required implementation.
In March, the firm received a non-objection from the Federal Reserve to its revised capital plan as a result of the annual CCAR process. The board increased the common dividend by $0.04 per share, to $0.44, in 2Q15, which equates to a 28.6% payout based on 2Q15 diluted earnings per share. JPM also has the authority to repurchase $6.4 billion of equity from 2Q15 to 2Q16. JPM repurchased about $1 billion of common equity during the quarter.
Additional information is available at 'www.fitchratings.com'.