Earnings: JP Morgan

JP Morgan todays reports another strong quarter earnings with its net income surging to $3.6bn or $0.82 per share from last year’s $527m ($0.09) and last quarter’s $2.7bn ($0.28).

Net revenue, on a managed basis, jumped a massive 79% from last year to $28.8bn as a result of higher principal transactions related to absence of markdowns on legacy leveraged lending and mortgage positions, strong trading results in the Investment Bank and higher investment portfolio tradn9ig income in Corporate.

Still putting heavy consideration to their exposure to the consumers, the company added $2bn to its consumer credit reserves bringing its allocated loan loss reserves to $31.5bn or approximately 5.3% of its total loans.

In relation to that, CEO Jamie Dimon notes:

“While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue. Despite this near-term uncertainty about the path of the economy, our strong capital position and underlying earnings power will enable us to continue to invest in our businesses, creating a lasting franchise for many years to come.”

And in lieu of social responsibility, Dimon also mentioned the things the bank is doing to help consumers with fees and mortgages.

“JPMorgan Chase continues to help consumers and communities in this challenging economy. We recently announced the decision to revamp our overdraft policies to make it easier for customers to have more control over the fees they pay. In addition, our Card Services business has developed new innovative products that enhance the way customers manage their spending and borrowing. We are also aiding communities by working with struggling mortgage customers to modify their loans. We have approved more than 262,000 new trial modifications under the U.S. Making Home Affordable Program and our own modification program, nearly 90% of which include a reduction in payments for the homeowner.”

Tier 1 Common ratio also went up to $101bn or 8.2% while Tier 1 Capital ratio stood at 10.2% from last quarter’s 9.7% and 8.9% from last year.

Jobs weren’t spared despite improving conditions, as the bank let go of 7,500 redundancies to bring the total headcount to 220,860.

Here’s the breakdown of the numbers, if you care:

The investment banking arm of JP Morgan continued its resilience with a net revenue of $7.5bn, higher than Q2’s $7.3bn and last year’s $4.1. Net income of $1.92bn was similarly higher by more than 20% from last quarter’s $1.42. These positive results were boosted by equity underwriting fees, which were up 31% and the debt underwriting fee of $593, up by 19%. The bank saw a decline of 33% in the advisory fees it received for the quarter.

Results also included losses of $497m from tighter credit spreads on certain structured liabilities. On a positive note, provision for credit losses were significantly down from Q2, although higher than last year’s.

Some other achievements for the quarter:

  • Ranked #1 in Global Debt, Equity and Equity-related; #1 in Global Equity and Equity-related; #1 in Global Long-Term Debt; #1 in Global Syndicated Loans; and #4 in Global Announced M&A, based on volume, for the year to date ended September 30, 2009, according to Thomson Reuters.
  • Ranked #1 in Global Investment Banking Fees for the year to date ended September 30, 2009, according to Dealogic.

For the bank’s retail financial services (RFS), net income was down from both Q2 and last year due to the effects of lower mortgage production revenue, higher provision for credit losses, higher noninterest expense and lower loan balances. Positives came out of the WaMu transaction.

The improved numbers from RFS were due to retail banking’s net income, higher by 44% from last year annd by 8% from Q2. It also benefited from the WaMu deal by getting higher total deposits and checking accounts. On the other hand, consumer lending resulted in a higher loss. Even with a 72% increase in net revenue, primarily driven by the WaMu deal, that improvement was taken over my lower mortgage production revenue, lower loan balances annd higher credit loss provision.

For JP Morgan’s Card Services department, losses went up to $700m from last quarter’s $672 and last year’s profit of $292. This is mainly the result of higher provision for credit losses. Delinquency rates (30-day) jumped from 3.91 last year to 5.99% this quarter.

The commercial banking arm of JP Morgan reported higher net revenue of $1.5bn, up 30% from last year. Its bottomline also posted increase, albeit at a lower rate of 9%. On a quarter to quarter basis, the profitability slightly went down still due to higher provision for credit losses and higher noninterest expense.

Distinguishing itself from the others, the bank’s Treasury and Securities services showed deteriorating performance in just about every aspect. Net income declined 26% from last year to $104m while net revenue dropped to $1.79bn from last quarter’s $1.9bn and last year’s $1.95. Topline figure was lower as a result of declines in asset valuations and demand, lower spreads, and balances on liability products, as well as effects of market depreciation on certain custody assets.

Unlike TSS, JP Morgan’s Asset Management showed improvement in all key aspects. Net Revnue surpassed the $2bn mark while its provision for credit losses and noninterest expense also declined from last quarter. Net income was higher by almost 30% after jumping from the $351/2m the previous comparative periods to $430m in the third quarter. Revenue increases are attributed to higher revenue from Bear Stearns Private Client Services, up 10% and revenue from retail, up 18%. Assets under supervision went up 7% from the prior year while AUM was higher by 9%.

For the complete earnings release, go here.


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