JPMorgan Chase earns $2.7 billion

Banking giant easily surpassed Wall Street's estimates for the second quarter, as investment banking performance offset consumer-related credit losses.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By David Ellis, staff writer

JPMorgan Chase chairman and CEO Jamie Dimon said he was "pleased" by the bank's better-than-expected results.
Shares of JPMorgan Chase have managed to remain higher after rallying in March.

NEW YORK ( -- JPMorgan Chase once again proved that it has been one of the better-run banks during the financial crisis after reporting quarterly results that blew past Wall Street estimates.

Buoyed by a solid performance in its investment banking division, the company said Thursday that profits in the second quarter rose 36% from a year ago to $2.7 billion, or 28 cents a share.

That profit came despite a $1.1 billion one-time reduction to earnings as a result of the company's decision to repay $25 billion in government money received under the Troubled Asset Relief Program.

Thursday's results will most likely add to the ongoing debate on Wall Street as to whether the worst is indeed over for the nation's banks and if a recovery is already well underway.

On Tuesday, rival Goldman Sachs (GS, Fortune 500) delivered blowout second-quarter results, reporting a profit of $3.44 billion that were far better than expected.

"The surviving banks are benefiting from the shakeout in banking," said Len Blum, managing partner at New York based investment bank Westwood Capital. "Goldman Sachs and JPMorgan Chase are clearly the winners."

Heading into Thursday, few analysts were expecting the quarter to turn out so well for the bank. Consensus estimates were for the company to book a profit of $280 million, or just 4 cents a share.

Some bearish analysts even suspected that the firm might swing to a loss in the quarter, given its significant exposure to the American consumer.

JPMorgan Chase (JPM, Fortune 500) stock declined over 1% in Thursday trading however, as investors tried to recoup some profits following a run-up in its shares earlier this week.

Consumer credit still a problem

JPMorgan Chase chairman and chief executive officer Jamie Dimon said he was "pleased" by the firm's latest numbers, even as the results were weighed down by higher credit costs, particularly in the company's consumer-related businesses.

Both the company's consumer lending and credit card operations lost money in the quarter, hurt in large part by the company's decision to set aside more money to cover bad home equity and student loans as wells as future credit card losses. Credit costs in the company's credit card division alone were $4.6 billion during the quarter.

Mike Cavanagh, JPMorgan Chase's chief financial officer, acknowledged that the bank's card business was likely to remain unprofitable both this year and next as the nation's unemployment levels remain elevated.

Analysts pointed to other credit-related problems as well.

Rochdale Securities bank analyst Dick Bove expressed concern about rising levels of non-performing assets, or loans that are not collecting interest or principal payments, which nearly tripled to $17.5 billion in the quarter from $6.2 billion a year ago.

"The key in looking at these banks to us continues to be the direction of non-performing assets," Bove wrote in a note to clients Thursday. "This was not good for this company."

Despite the economic climate, the New York City-based firm maintained that it was still extending credit to consumers, small businesses and municipalities. During the quarter, the bank said it issued approximately $150 billion in new loans.

More acquisitions ahead?

JPMorgan Chase's investment banking division, which reported a profit of nearly $1.5 billion, up from $394 million a year ago, more than helped offset problems in the consumer lending unit.

Fees in the JPMorgan's equity underwriting business, for example, soared to a record $1.1 billion, after a number of top financial firms, including itself, issued stock as part of an effort to repay TARP funds.

The disappearance of rivals such as Lehman Brothers and the weakened state of peers like Citigroup has helped the bank assert its dominance on Wall Street, as has last year's purchase of Bear Stearns.

The company has also boosted its profile on Main Street. Last fall, it significantly widened its retail banking footprint with its high-profile purchase of the failed Seattle-based thrift Washington Mutual.

Chase has been working hard to integrate both acquisitions and Dimon hinted the bank may be willing to grow even further at a time when both its rivals and smaller lenders are suffering as a result of the recession.

In a briefing with reporters, Dimon did not rule out the possibility of undertaking another purchase in the future, noting only that it would have to make sense for the larger firm.

"We are still in the position that if something proper presents itself, we would definitely consider it," he said.

Other top-tier financial firms are slated to report their quarterly results in the next week, with both Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) due up Friday. Both Morgan Stanley (MS, Fortune 500) and Wells Fargo (WFC, Fortune 500) will publish their latest numbers next Wednesday.

Talkback: Are you living on minimum wage? What would the nationwide hike to $7.25/hour mean for you? Is the minimum wage enough to live on? E-mail us your story and you could be part of an upcoming article. For the Comment Policy, click here. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.