J.P. Morgan Chase Reports 36 Percent Jump in Second-Quarter Profit
Thursday, July 16, 2009; 8:38 AM
J.P. Morgan Chase reported this morning that it earned $2.7 billion in the second quarter as the massive success of its Wall Street trading activities outpaced its rising losses on consumer loans.
The giant bank topped by 36 percent the $2 billion it earned during the comparable period last year, but earnings per share fell to 28 cents from 53 cents because of heavy issuance of new shares.
The strong earnings exceeded the predictions of most financial analysts, two days after Goldman Sachs also reported better-than-expected results. The combination is likely to increase the confidence of investors that the healthiest banks are once again reliable bets to make money.
Most of the good news came from J.P. Morgan's investment bank, which benefited from the absence of former rivals such as Lehman Brothers and the weakness of others, such as Citigroup. The company said, for example, that it doubled its revenue from helping companies sell shares to investors. It also nearly doubled its revenue from buying and selling financial instruments.
The New York company's retail businesses had a much tougher quarter. J.P. Morgan's credit card division, among the nation's largest, lost $672 million as more borrowers defaulted on loans. Problems were particularly severe in a portfolio the bank acquired with the failed Washington Mutual, which had focused on lending to customers with credit problems.
The company's retail bank, also among the nation's largest, eked out earnings of $15 million.
J.P. Morgan's strong performance is creating distance between the bank and its largest rivals. The company repaid $25 billion in federal aid last month, freeing it from restrictions on compensation that still apply to Bank of America, Wells Fargo and Citigroup.
By repaying the money, J.P. Morgan also escaped restrictions in hiring foreign workers.
But perhaps most important is the perception that the bank is free from government meddling. Bank of America and Citigroup both are operating under elaborate and restrictive agreements with federal banking regulators that affect everything from executive appointments to corporate strategy.
Bank of America and Citigroup are scheduled to report earnings tomorrow. Other banks, including Wells Fargo and Capital One Financial, report earnings next week.