Investment banking powers JPMorgan profit
JPMorgan Chase & Co quarterly profit rocketed to a much-higher-than-expected $3.6 billion as bond trading revenue surged, boosting optimism about a rebound in top Wall Street banks.
The results cement JPMorgan’s position as one of the few banks that has emerged stronger from the financial crisis. The bank’s shares rose as much as 4 percent to a one-year high in morning trading, leading the Dow Jones industrial average higher.
Investment banking profits were the lion’s share of the 580 percent increase in JPMorgan earnings, boding well for other large banks due to report this week, including Goldman Sachs Group Inc and Citigroup Inc.
“In this environment, this is a championship performance,” said Mike Holland, president of Holland & Co in New York.
Profits were boosted by earnings from investment bank Bear Stearns Cos and Seattle-based thrift Washington Mutual Inc, two ailing businesses JPMorgan was able to snap up last year in the depths of the financial crisis.
But the results were not uniformly positive. The bank lost money in its credit card business, and Chief Executive Jamie Dimon warned on a conference call that it is still too early to conclude the tide has turned on rising loan losses. Dimon’s caution and respect for risk has made him one of the most revered bank CEOs among investors and the Washington power elite.
One of the biggest contributors to JPMorgan’s profits was bond trading, where rising asset values have helped Wall Street firms all year. Stock and bond underwriting revenue also jumped, reflecting the bank’s No. 1 position in the investment bank league tables.
JPMorgan’s investment bank reported net income of $1.9 billion, up from $882 million a year earlier. The increase came in part from gains of $400 million on leveraged loans and mortgage-related securities that had a $3.6 billion writedown in the year-earlier quarter.
Trading gains lifted fixed income markets revenue to an eye-popping $5 billion, up from a little more than $800 million a year earlier.
JPMorgan as a whole posted third-quarter net income of 82 cents a share, compared with 9 cents in the same quarter last year.
Analysts on average had forecast earnings of 52 cents a share, according to Thomson Reuters I/B/E/S.
Chief Financial Officer Mike Cavanagh said the bank could boost its annual per-share dividend to around 75 cents or $1 early next year “if we’re lucky.” The bank cut the annual dividend to 20 cents a share from $1.52 in February.
CREDIT CARD WOES
But JPMorgan also has sizable consumer lending businesses, including some particularly troubled credit card portfolios it inherited from Washington Mutual, where trends are a little harder to discern. The bank posted $700 million of losses in its credit card business in the third quarter, compared with a $292 million profit a year ago.
There were some bright spots in the credit card business: Credit card loans owned by the bank and investors and deemed uncollectable rose by just 1 percent, a big deceleration from a 25 percent increase in the second quarter.
Filed under: technology by TheDoor