JPMorgan Chase said last night record investment banking and trading results drove quarterly profit 36 per cent higher, topping Wall Street forecasts, but reported a surge in consumer credit losses that foreshadows deeper problems on Main Street.
Though the second-largest US bank is among the nation's healthiest major lenders, it more than doubled the amount set aside for bad loans, to $9.7 billion. JPMorgan expects its credit card business to lose money this year and next, and sees higher commercial real estate losses for several quarters.
"We're still obviously in a pretty big recession,” chief executive Jamie Dimon said on a conference call.
He said rising unemployment will put upward pressure on credit losses.
Results nonetheless benefited from improving credit markets and regulators' efforts to stimulate the economy by keeping borrowing costs low, bolstering mortgage and other lending.
“The bank has done reasonably well on the trading side and less well on the home and private lending side,” said Peter Dixon, an economist at Commerzbank in London.
JPMorgan shares closed down 13 cents at $36.13 on the New York Stock Exchange. They have risen 15 per cent this year, while the KBW Bank Index is down 14 per cent.
Second-quarter profit rose to $2.72 billion from $2 billion a year earlier. Profit per share fell to 28 cents from 53 cents as the number of shares outstanding increased.
The New York-based bank said net revenue jumped 41 per cent to $27.71 billion and according to general accounting principles was $25.62 billion.
Results included per-share charges of 10 cents to bolster a federal deposit insurance program and 27 cents tied to last month's repayment of $25 billion taken from the government's Troubled Asset Relief Program. JPMorgan has said it will let the Treasury Department auction the attached stock warrants.
Analysts on average expected profit of 4 cents per share on revenue of $25.91 billion, according to Reuters Estimates.
“Core earnings power appears strong,” wrote Standard & Poor's equity analyst Stuart Plesser.
Trading profits helped Goldman Sachs Group post much better-than-expected quarterly earnings on Tuesday. Bank of America Corp and Citigroup Inc are expected on Friday to post relatively weaker operating performance.
Reuters