[DEBATE] : JPMorgan earns $2.1bn on record sales

[Berend Schuitema]

JPMorgan earns $2.1bn on record sales

By Alan Rappeport in New York 

Published: April 16 2009 12:26 | Last updated: April 16 2009 13:53

JP Morgan on Thursday reported first quarter profits of $2.1bn as its
investment banking business returned to profitability, beating analysts'
expectations, and said that it would not require additional capital to repay
funds lent by the US government.

Net income at $0.40 a share was 10 per cent lower than what it earned in the
first quarter of last year but was ahead of consensus estimates of $0.32 a
share.

The news followed better-than-expected results from Goldman Sachs and an
optimistic outlook from Wells Fargo in the past week and JPMorgan shares
jumped 2.73 per cent to $33.45 in pre-market trading.

Jamie Dimon, JPMorgan's chief executive, said that the bank benefited from
growth in its retail banking business, higher volumes in its mortgage
refinancing business and "excellent progress" integrating its recent
acquisition of Washington Mutual.

In a conference call with analysts Mr Dimon said that the bank would like to
repay funds that it received through the government Troubled Assets Relief
Program (Tarp) as soon as possible and that it would await federal guidance
and the results of stress tests. 

"We want to do it in the interest of the United States, in addition to in
the interests of JPMorgan," Mr Dimon said.

Unlike Goldman Sachs which on Monday announced a stock offering to help
repay its Tarp funds, Mr Dimon said that it would not need to make such a
move.

"Obviously we're in a pretty strong position with that and we don't think we
need more capital," Mr Dimon said.

The investment bank division reported net income of $1.6bn in the three
months, compared with a loss of $87m in the same period last year. The
unit's revenue reached $8.3bn, up from $3bn a year ago. The retail financial
services unit earned $474m on revenue of $8.8bn, which was up from $4.8bn a
year ago.

Total revenue for the first three months reached a record $26.9bn from
$17.9bn a year ago. However, the group's provision for credit losses was
$10.1bn, up 97 per cent from the previous year. In particular, the provision
for credit losses in the consumer segment was $8.5bn, compared with $4.4bn
in the prior year. The increase reflected "higher net charge-offs, as well
as increases in the allowance for credit losses primarily related to credit
card loans and home lending," the bank said.

"We are confident that even a highly adverse economic scenario would not
compromise our overall strength and stability - or our ability to enhance
our franchises," Mr Dimon said in a statement. "We remain well-positioned to
benefit when the economy recovers and remain committed to serving our
clients, investing in our franchise and building a stronger company for the
future."

JPMorgan's Tier 1 capital ratio was 11.3 per cent. Its tangible common
equity ratio, a measure of health that the government might use in its
stress tests of US banks, sits at 7.2 per cent. Both figures were improved
from February when JP Morgan cut its dividend..

In February JPMorgan surprised investors by slashing its quarterly dividend
by 87 per cent to preserve capital, saying that "extraordinary times call
for extraordinary measures".

The move will save the bank $5bn a year. JPMorgan, which has accepted $25bn
in capital from the US government, said at the time it had been "solidly
profitable" in the first quarter to date and had $81bn of tangible common
equity on its balance sheet.

JPMorgan's results come as banks have reported or signalled better than
expected results in the last week. On Monday Goldman Sachs, reported
first-quarter net earnings of $1.81bn and revealed plans for a $5bn stock
offering that will be used to help repay the $10bn in federal government aid
that it received at the height off the credit crisis.

Last week Wells Fargo lifted hopes for the stricken banking sector by
announcing that it would report record first-quarter profits of $3bn later
this month on $20bn of revenue.

Copyright The Financial Times Limited 2009