J.P. Morgan reports 57 percent jump in quarterly profit

By Brady Dennis
Thursday, April 15, 2010

Banking goliath J.P. Morgan Chase reported a $3.3 billion first-quarter profit Wednesday, exceeding analyst expectations and underscoring how some of Wall Street's powerhouses continue to boost their bottom lines in the wake of the financial crisis.

Chief executive Jamie Dimon took an optimistic view of the results, noting that fewer borrowers are defaulting on loans as the financial system continues to stabilize.

"While the economy still faces challenges, there have been clear and broad-based improvements in underlying trends," Dimon said in a statement. "We believe these improvements will continue and are hopeful they will gather momentum."

The company's net income for the first three months of 2010 marked a 57 percent increase from the $2.1 billion earned in the year-earlier quarter. Trading profits in its investment bank helped offset continued consumer credit losses tied to mortgages and credit cards.

"We continued to see delinquencies stabilize, and in some cases improve, in our credit portfolios," Dimon said. "Ultimately, the health of these portfolios will track the health of the economy."

The firm also set aside less in reserves to cover expected loan losses than in the past. It still has on hand more than $39 billion, or 5.6 percent of total loans, but that represents a decrease from previous quarters. The company said it put aside $2.3 billion in litigation reserves, which includes funds for mortgage-related lawsuits.

Shares of J.P. Morgan rose 4.1 percent on Wednesday, to $47.73, helping to drive broader gains on Wall Street. The Standard & Poor's 500-stock index gained 1.1 percent to close at 1210.65, its first close above 1200 since September 2008.

Over the past two years, J.P. Morgan has fared better than most other Wall Street banks, remaining profitable throughout the crisis and keeping its reputation largely intact. The result has been a palpable sense of confidence in the firm, both in Washington and on Wall Street.

Dimon has become a ubiquitous presence in the nation's capital, meeting regularly with Obama administration officials and lawmakers. His company has played an active role in trying to shape the pending overhaul of financial regulations under consideration in Congress.

"We should focus on building good regulation -- not simply more or less of it," Dimon wrote in a recent letter to shareholders, adding that he supports completing the overhaul this year, in order to give businesses certainty. "The last thing we need is to enact new policies that over-regulate and work at cross-purposes without reducing system-wide risk. None of us can afford the costs of unnecessary or bad regulation."

The company also has objected to the Obama administration's effort to persuade lenders to reduce the loan balances for homeowners who owe more on their mortgages than their homes are worth, arguing that such reductions could reward those who took on too much debt while punishing future homeowners by increasing borrowing costs.

Like other big banks, J.P. Morgan has benefited from unprecedented government assistance. It relied on federal aid in buying the distressed investment bank Bear Stearns and the troubled mortgage lender Washington Mutual. It accepted $25 billion in emergency aid from the Treasury Department in 2008, which it has since repaid, and has borrowed billions of dollars more through other government support programs. J.P. Morgan's solid numbers on Wednesday stand in contrast to those of many smaller banks. Growing loan defaults, particularly in commercial real estate, have caused more than 40 banks to fail this year, on top of more than 140 failures in 2009.

The Wall Street giant is the first of the nation's largest banks to report earnings and could serve as a bellwether. Bank of America reports later this week, followed by Citigroup, Goldman Sachs and others.

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