JPMorgan Chase & Company kicked off earnings season for the nation’s big banks on Thursday with news of a strong gain in second-quarter profit. þþAfter powering ahead for the last year on the strength of its Wall Street trading operations, JPMorgan said its net income rose 76 percent, to $4.8 billion, from $2.7 billion in the period a year earlier. Earnings rose to $1.09 a share, from 28 cents. þþThe results benefited from a one-time release of $1.5 billion in loan-loss reserves. þþRevenue declined 8 percent, to $25.6 billion, in the second quarter, from $27.7 billion in the period a year ago. þþThe results — which exceeded of analysts’ expectations of 70 cents a share — mark the start of a rush of quarterly results from major banks. Citigroup and Bank of America are scheduled to report results on Friday, with Goldman Sachs, Morgan Stanley and Wells Fargo to follow next week. þþJPMorgan emerged from the global financial crisis bigger, stronger and healthier than many rivals. But like other big banks, it still confronts fallout from the recession, with potential losses on its portfolio of home mortgages and consumer loans. The jittery markets, unnerved by the European debt crisis and May’s flash, dampened trading results for JPMorgan and its main rivals. þþEven so, Jamie Dimon, JPMorgan’s chairman and chief executive, seemed cautiously optimistic that the worst for his bank — and the industry — was behind. For the first time since the crisis began, JPMorgan released money from the reserves it had set aside cover future losses. þþThough the $1.5 billion helped cushion the bank’s results in the quarter, Mr. Dimon stopped short of saying the economy was turning around. þþ“Although we are gratified to see consumer-lending net charge-offs and delinquencies decline, they remain at extremely high levels,” Mr. Dimon said. “It is too early to say how much improvement we will see from here.” þþTellingly, however, the bank did not raise its dividend. Mr. Dimon said late last month that he planned to see further improvement in the economy and more clarity about minimum capital requirements before contemplating an increase. He had previously hinted such a move could come in the second half of 2010. þþWith the Senate on the verge of passing the financial reform bill, Mr. Dimon said that many challenges and uncertainties remained that could result in unintended consequences for the bank’s businesses and the broader markets. þþ“With a need for global regulatory coordination and hundreds of rules to be written, increased focus is critical in order to implement these reforms in a way that protects consumers and the competitiveness of the U.S. financial system, while ensuring the flow of safe and sound credit,” he said in the statement. þþMr. Dimon did not present an estimate of how much the legislation would cost his bank. JP Morgan, however, set aside about $550 million to cover the cost of a one-time tax on the 2009 bonuses of workers based in Britain. Analysts say the Washington’s reform package could lower earnings by as much as 11 percent. þþIt was a difficult second quarter in some ways. The investment bank posted a $1.3 billion profit, about 44 percent less that it earned in the first quarter. After making money every day in the first three months of the year, trading results in fixed-income, commodities and currency were much weaker as the market swung wildly. The bank benefited, however, from releasing about $325 million originally set aside to cover losses. þþChase’s consumer businesses, meanwhile, showed modest improvement in its results. The credit card division posted a $343 million profit, after several straight quarters of bleeding red ink. Bank executives raised its projections of the cost of new credit card legislation to $750 million, from about $500 million. þþThe retail bank earned about $1 billion, in part because the bank set aside less money to cover future mortgage and home equity losses. Revenues fell by about 2 percent, as the bank took in less fee income on deposit accounts. þþMr. Dimon said that the loan losses in these units remained extremely high. “Returns in our consumer-lending businesses are still unacceptable,” he said. þþEven so, JPMorgan has emerged from the crisis in better shape than most of its peers, and perhaps no bank chief executive fared better than Mr. Dimon. þþMr. Dimon earned that distinction by playing as much defense as offense during the housing boom, which insulated JPMorgan more than most when the boom went bust. When the bust became a full-blown financial crisis, Mr. Dimon bought up Bear Stearns and then Washington Mutual, the giant thrift, bolstering his position in investment and retail banking while others were shrinking. þþDuring the second quarter, he continued his expansion plan. He scooped up a European commodities trading unit from the Royal Bank of Scotland and is currently in talks to buy a Brazilian money manager. Meanwhile, Mr. Dimon signaled his international ambitions with the appointment of a top lieutenant to a new post overseeing an aggressive push into Brazil, China and a dozen or so other emerging markets. þ
Source: NY Times
