JP Morgan profits jump 36pc in second quarter
JPMorgan Chase said investment banking and trading drove a larger-than-expected 36pc jump in quarterly profit.
Though the second-largest US bank is widely considered among the healthiest of the nation's major lenders, it added $2bn (1.2bn) to credit reserves in the quarter and set aside more than twice as much as a year earlier for bad loans.
The bank said credit quality in consumer mortgages and credit cards is deteriorating faster than it expected. (This may be due to marketing methods, bringing unqualified borrowers into the system and then changing rates and calling notes often without prior notice)
Jamie Dimon, the chief executive, said the bank was confident that its capital, reserve levels and earnings power were solid despite a difficult economic environment that could worsen.
Second-quarter net income rose to $2.72bn from $2bn a year earlier, the bank reported on Thursday. Net revenue jumped 41pc to $27.7bn.
Profit per share fell to 28 cents from 53 cents as the number of shares outstanding increased. Analysts on average expected profit of 4 cents per share on revenue of $25.91bn.
The results followed better-than-expected earnings on Tuesday from Goldman Sachs. Bank of America Corp and Citigroup, JPMorgan's main rivals, may fare less well when they report results on Friday.
It looks like good, strong numbers, and it looks pretty broad-based, said Michael Hecht an analyst at JMP Securities. We are in an increasing world of haves and have-nots, and we know where JPMorgan and Goldman fall.
JPMorgan last month repaid $25bn taken from the Troubled Asset Relief Program. The New York-based bank has said it will let the Treasury Department auction the attached stock warrants, rather than pay an inflated price to buy them back.
Second-quarter results included per-share charges of 27 cents relating to the TARP repayment and 10 cents to bolster a federal deposit insurance program.
Profit in the investment bank more than tripled to $1.47bn, helped by record investment banking fees and fixed-income trading revenue.
Offsetting this was a $672m loss in credit card operations, reflecting in part the September acquisition of the bank units of the failed Washington Mutual. JPMorgan boosted its projected losses on cards and sees a loss rate of about 10pc for this quarter.
Consumer banking's profit nearly vanished, falling to $15m from $503m, hurt by soaring credit losses tied to housing, including from Washington Mutual.
The bank said it set aside $9.7bn in the quarter for credit losses, up from $4.29bn a year earlier but down from the first quarter's $10.07bn.
JPMorgan now expects near-term quarterly losses of about $600m from prime-quality mortgages, up from $500m it forecast in April, and $500m from subprime mortgages, up from a previous forecast of $375m-$475m.