JPMorgan Chase & Co, the second- largest US bank by assets, said profit in the third quarter soared almost sevenfold, beating analysts' estimates, as fixed- income revenue surged.
Earnings climbed to $3.59 billion, or 82 cents a share, from $527 million, or 9 cents, in the same period a year earlier at the height of the financial crisis, the New York-based company said on Wednesday in a statement. Last year's quarter included $640 million of losses tied to the takeover of Washington Mutual.
Chief Executive Officer Jamie Dimon, who repaid the firm’s $25 billion of government rescue funds in June, is capitalising on his 2008 acquisitions of Bear Stearns Cos and WaMu’s banking business. Investment-banking revenue from fixed-income markets jumped to a record $5 billion, compared with markdowns of $3.6 billion a year earlier.
“JPMorgan will be a star,” said Malcolm Polley, chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, which manages $900 million. “If you have enough capital, then you can expand and try to earn your way out of problems,” Polley said before earnings were released.
JPMorgan rose to $47 at 7.17 am from $45.66 at the close on the New York Stock Exchange on Tuesday.
Credit reserves
The bank added $2 billion to its consumer credit reserves, bringing the company wide total to $31.5 billion, or 5.3 per cent of total loans.
“Credit costs remain high and are expected to stay elevated for the foreseeable future,” said in the statement. “While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue.”
JPMorgan is the first of the largest US banks to report earnings. Goldman Sachs Group Inc, whose headquarters is in New York, may say tomorrow that profit almost tripled to $2.4 billion, according to analysts' estimates. New York-based Citigroup Inc, which also reports on Thursday, is expected to post a $2.55 billion loss that would mark its sixth unprofitable quarter in the past eight.
Bank of America Corp, JPMorgan’s bigger competitor, may post a loss of $212.2 million on October 16 as the Charlotte, North Carolina-based company continues to integrate its Merrill Lynch & Co acquisition.
Bill Winters
Dimon ousted his investment bank co-CEO, William Winters, earlier this month and moved asset-management chief Jes Staley to run the unit. Steven Black, Winters’s former co-CEO, will be executive chairman of the division until the end of 2010. The unit accounted for 63 percent of the bank's net profit in the first half of the year, compared with 7 per cent in 2008's first six months.
JPMorgan is the world’s biggest underwriter of stock and equity-linked securities as well as US debt.
The bank’s credit-card and consumer businesses have stalled as the US economy emerges from the worst recession since the 1930s. The unemployment rate rose in September to 9.8 per cent, the highest level since 1983, and economists predict a rebound in consumer spending will wane as joblessness surpasses 10 per cent.
