JP Morgan Dimon 2
JPMorgan CEO Jamie Dimon. Reuters

JPMorgan Chase & Co. (NYSE:JPM), the nation’s biggest bank by assets, is expected to report a 11.2 percent decrease in earnings per share in the first quarter of the year as a result of lower trading activities through February.

The New York-based bank will report first-quarter earnings on Friday before markets open. Analysts polled by Thomson Reuters Eikon expect JPMorgan’s net income to drop 11.07 percent to $5.45 billion compared to $6.13 billion in the same quarter last year, while earnings per share are expected to fall from $1.59 to to $1.41.

Revenue is projected to dip by 5.1 percent to $24.53 billion from $25.85 billion in the first quarter of 2013. Excluding one-time items, analysts expect earnings per share of $1.41 compared to $1.59 in the first quarter of 2013.

Many analysts have adjusted expectations following JPMorgan’s annual investor day in February. Management indicated at the time that client trading activity, which includes equities and fixed income, is tracking 15 percent lower than the same quarter a year before.

“Reducing 1Q14 principal trading account profits by 15 percent year-over-year results in a $400 million decrease in our estimate for that line item,” Keefe, Bruyette & Woods analysts wrote in a research note on March 2. “This impact is partially offset by an assumed $145 million decrease in our employee compensation expense tied to lower trading activity.”

By Keefe, Bruyette & Woods' calculations, the resulting trading revenue drop causes net income to decrease $175 million, which works out to about five cents of loss per share value.

In addition, management has indicated that mortgage origination volumes have started the year off slowly. While applications typically decline significantly in the beginning of the year, the decline looks to be especially sharp across the banking sector this year.

“We expect -24 percent quarter on quarter, worse than historical declines of -9 percent, close to the lowest levels we have seen post 2000,” Goldman Sachs analysts wrote on Monday.

Some metrics are improving, however. Last year, JPMorgan paid out more than $20 billion in legal fees, including a $13 billion settlement with the U.S. government to settle charges that the bank overstated the quality of mortgages it was selling to investors prior to the financial crisis. The bulk of these charges have been settled in 2013, and costs should drop for the bank in 2014.

“We are hopeful that the 2013 settlements will allow legal costs to fall to a range more in line with our estimates [of $400 million per quarter],” Keefe, Bruyette & Woods analysts wrote.