JPMorgans Summer Blockbuster – US-FOREX.US
JPMorgan Chase blew past Wall Street’s second-quarter expectations, but the bank faces difficulties navigating credit and loan losses in an uncertain environment.
JPMorgan Chase
reported earnings of 2.7 billion, or 28 cents per share, ahead of the 2.0 billion, or 53 cents per share, recorded in last year’s corresponding period. The Street had predicted earnings of 4 cents per share. JPMorgan’s year-over-year earnings per share fell because of the increased amount of outstanding shares.Despite the good news, JPMorgan’s stock slipped 1.1%, or 39 cents, to 35.87. The Financial Select Sector SPDR
exchange-traded fund also slid 1.2%, or 15 cents, to 12.11, while the SPDR KBW Bank
ETF decreased 0.6%, or 11 cents, to 18.64. Thursday’s report came with its share concerns. In the second quarter, Chase’s credit card portfolio saw 8.8% charge-offs, while the Washington Mutual portfolio “trended toward” 18%-24% charge-offs. JPMorgan Chief Executive Jamie Dimon said it was unlikely that the company’s credit card business will make money in 2010, according to TradeTheNews.com. JPMorgan also sees WaMu credit losses approaching 24% by the end of the year, with Chase losses approaching 10% in the third quarter.Dimon expects to add to loan loss reserves in the third and fourth quarters, and said that commercial real estate will continue to worsen for the next several quarters. Though it will not be significant for JPMorgan’s numbers, he does expect commercial real estate trouble to be “a big deal” for regional banks.Overall trading is expected to remain volatile, as well as an uncertain environment. Dimon said that there will need to be an improvement in conditions and charge-offs before the company increases its dividend, adding that it could happen in the early part of next year. He also said the company would repurchase shares when deemed appropriate.
JPMorgan has emerged from the financial crisis relatively unscathed. Dimon has guided it in a good direction by picking up big-ticket assets like Bear Stearns and WaMu, making him one of Wall Street’s “big men on campus”. According to the league tables compiled by Dealogic, JPMorgan was a leader in equity offerings and bond underwriting, and was only behind Goldman Sachs
in merger advisory. Yet, while Goldman’s shares have risen 83.5% since the beginning of the year, JPMorgan has only grown 13.4%. Unlike pure-play brokers, JPMorgan also has a sizable loan portfolio, tying it to the issues related to mortgages, bank equity and credit cards. Still, the company has managed to outperform the Financial Select Sector SPDR ETF, which has slipped 3.6% in 2009, and the SPDR KBW Bank ETF, which has tumbled 15.8%.Uncle Sam has also taken a bite out of JPMorgan’s bottom line. Last month, prominent banking analyst Dick Bove cut his full-year earnings outlook to 1.23 per share, from 1.61. Bove, who is vice president of equity research at Rochdale Research, made his call on account of a Federal Deposit Insurance Corporation assessment charge, as well as costs related to the Troubled Asset Relief Program.On Tuesday, Goldman announced it beat quarterly expectations, thanks to record trading revenue and diminished competition.