Investors who had low expectations for JPMorgan Chase's (JPM - Free JPMorgan Stock Report) March-quarter earnings were proven right. The stock declined somewhat in Friday mid-morning trading after the global financial services provider and Dow-30 component reported results that fell well short of earnings in the year-earlier period.

The company earned $1.28 a share in the opening period of 2014, down 19% from the $1.59 it reported for the 2013 March term, and about 10% below our estimate of $1.43. A 13% decline in fee-based revenues was largely responsible for the shortfall. As widely anticipated, mortgage revenues tumbled 65% compared with the year-earlier quarter, reflecting the decline in refinancing activity in the past year and the impact of harsh weather on home sales. Fixed-income markets revenues were also widely expected to decline, and they did, by nearly $1 billion from the 2013 March term. Meanwhile, expenses fell 5% year to year, aided by reductions in the workforce and the absence of significant legal expenses. And the increase in the loan loss provision was tempered by modest releases of loan loss reserves.

Looking at JPMorgan's performance by business line, the Consumer & Community Banking segment's profits declined 25% year to year on lower revenues. Results would have been flat absent the mortgage business. Both the mortgage production and servicing businesses turned in losses. On the production side, a 76% revenue plunge, on lower volume, drove much of the loss. Servicing results were depressed by a $400 million item related to mortgage servicing rights risk management. The company continues to right-size its mortgage business, reduce headcount, and align mortgage prices with risk. It looks for the servicing business to earn $500 million by the final quarter of 2014. Mortgage production income will depend on housing activity and interest rates, but management expects the business to report a loss in 2014.

Meanwhile, core consumer and business banking profits rose 15%, aided by strong deposit growth, and higher debit and investment revenues. But profits in the Card, Merchant Services & Auto portion of the Consumer business fell 15%, partly due to smaller releases of credit card loan loss reserves.

In the Corporate & Investment Banking business, revenue trends were mostly negative, including the aforementioned plunge in the fixed-income markets. The top-line weakness was partly offset by lower performance based compensation. Management indicated that the lower level of client activity continued into April, so results might not improve much in the June quarter.

In Commercial Banking, results slipped only a tad from the year-earlier term, hurt by tepid loan growth and higher employee and controls improvement costs. Progress here will depend on the loan pipeline, which has strengthened, but is still weak relative to the 2013 March period.

In contrast, the asset management business turned in a fairly decent performance. Long-term asset-under-management inflows remain very healthy, and the segment began the June period on a strong footing.

In all, the uneven economic recovery pace and the downturn in the mortgage market should remain significant headwinds for JPMorgan in 2014. The company has some room to lower expenses, however. But owing to the weak March-quarter showing, we are lowering our share-net estimate for 2014, from $6.00 to $5.50. At this time, we are tentatively introducing a 2015 earnings estimate of $6.00 a share.

Despite the disappointing March-quarter performance, the stock's decent total return potential may still be of interest to long-term investors, who might view the recent share price pullback as a good entry point. JPMorgan has solid positions in its markets and its earnings ought to respond positively as economic activity strengthens. Note that the company recently passed the Federal Reserve's bank stress tests, which allows it to pursue its plan to raise the quarterly common stock dividend by $0.02 a share, to $0.40, and to buy back up to $6.5 billion of its common stock over the coming 12 months.

About The Company: JPMorgan Chase & Co. is a global financial services company offering a variety of services with operations in over 60 nations. Operational divisions include investment banking, treasury & securities services, asset management, commercial banking, retail financial services, card services, and private equity investment. The company had previously merged with Washington Mutual in September, 2008, Bank One in July, 2004, and Chase Manhattan in the final month of 2000.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.