JPMorgan Chase & Co, the second- largest US bank, said profit rose for the first time since 2007, surpassing analysts’ most optimistic estimates as investment-banking fees reached a record.
Second-quarter earnings increased to $2.7 billion, or 28 cents a share, from $2 billion, or 53 cents, a year earlier, the New York-based bank said today in a statement. The average estimate of 14 analysts surveyed by Bloomberg was 5 cents a share, including costs to repay government bailout funds and an assessment by the Federal Deposit Insurance Corp.
Investment-banking revenue from trading and stock and bond underwriting is helping offset rising defaults on consumer loans, such as mortgages and credit cards. That’s allowed Chief Executive Officer Jamie Dimon to post net income during every quarter of the US recession that started in 2007, the only bank among the nation’s top five to manage that feat.
“This is a real tribute to Jamie Dimon,” said Charles Bobrinskoy, vice chairman of Ariel Investments in Chicago, in a Bloomberg Television interview. “He’s done a spectacular job in managing the firm through this difficult time,” said Bobrinskoy, whose company owned about 258,000 JPMorgan shares as of March.
JPMorgan’s 15 per cent gain this year on the New York Stock Exchange is the second-best performance in the 24-company KBW Bank Index, behind State Street Corp. The stock climbed 4.5 per cent to $36.26 in composite trading on Wednesday.
The bank is the largest to repay government cash under the Troubled Asset Relief Program, freeing it from compensation and other government restrictions. JPMorgan returned $25 billion in government funds last month, and paid more than $795 million to the US in dividends, according to a June 17 statement. The TARP repayment accounted for 27 cents a share, or $1.1 billion, the bank said today.
“JPMorgan’s image and performance during the current crisis should help it retain key employees and attract new business opportunities,” analysts at New York-based CreditSights Inc wrote in a July 13 research note.
The investment bank generated $1.47 billion of profit, almost quadruple the amount earned in last year’s second- quarter, as fees from underwriting stock and bond deals and fixed-income trading boosted results. The bank reported “modest gains” on leveraged loans and mortgage-related securities, compared with losses of $1.1 billion a year earlier.
The firm ranks No 1 in underwriting stocks globally and in managing bonds sold in the US, according to data compiled by Bloomberg. JPMorgan’s investment bank posted record revenue of $8.37 billion in the first quarter, including $4.9 billion from fixed-income trading.
Goldman Sachs Group Inc said July 14 it made $3.44 billion in the quarter on record revenue from trading and underwriting stock. Revenue in the three months ended June 26 was $13.8 billion, up from $9.43 billion in the first quarter and $9.42 billion in the second quarter a year earlier.
JPMorgan’s retail bank posted income of $15 million as home-equity and prime mortgage defaults continued to rise. Home- equity charge-offs climbed to $1.3 billion, or 4.61 per cent.
JPMorgan paid the FDIC a special assessment of $675 million in the quarter, resulting in a cost of 10 cents a share, as the agency asks banks to help replenish its cash reserves. The fund fell to $13 billion in the first quarter, the lowest since September 1993, after 53 lenders failed far this year.
Credit cards, a division Dimon has said is unlikely to make money this year, lost $672 million, compared with income of $250 million in the second-quarter last year. The managed charge-off rate, which generally tracks unemployment, climbed to 10.03 per cent, from 7.72 per cent in the first quarter and 4.98 per cent in the year-earlier period, according to the statement.
The lender boosted its loan loss reserve to $2 billion in the quarter, adding to the $28 billion in money set aside to cover credit losses as of March 31. Tier 1 capital, a gauge of the bank’s ability to withstand losses, climbed to 9.7 per cent from 9.3 per cent in the first quarter.
The asset-management unit’s profits fell 11 per cent to $352 million, while treasury and securities services posted income of $379 million, 11 per cent less than the previous year.
Bank of America Corp, the biggest US bank by assets, and No 3 Citigroup Inc are scheduled to release their latest results tomorrow. Wells Fargo & Co and Morgan Stanley will announce earnings July 22.
