JPMorgan earns $4.8 billion in 2nd quarter

July 15, 2010 6:35:16 AM PDT
JPMorgan Chase & Co. said Thursday its second-quarter net income soared 77 percent to $4.8 billion as a slowdown in losses from failed loans helped offset a difficult spring in trading and investment banking.

JPMorgan Chase, the first of the big banks to report earnings for the April-June period, easily surpassed analysts' expectations as it earned $1.09 a share, up from $2.7 billion, or 28 cents a share, a year earlier. Analysts had forecast a profit of 67 cents per share in the just-ended quarter.

JPMorgan Chief Executive Jamie Dimon said the company reduced its reserves to cover failed loans by $1.5 billion in this quarter but that loan losses "remain at extremely high levels."

"It is too early to say how much improvement we will see from here," Dimon said. Bankers have been cautious throughout the aftermath of the 2008 financial crisis when reporting progess in their loan businesses. Economists and investors are looking to those loan loss levels as an indicator of how well the economic recovery is faring.

Dimon also warned of possible "unintended consequences" to the bank's business from the financial regulatory overhaul awaiting congressional approval.

JPMorgan Chase has been one of the strongest banks as it weathered the financial crisis and recession, so its performance shouldn't be taken as a sign of how well other banks did during the quarter. Many financial companies don't have such big investment banking operations, which includes trading of stocks and bonds. That has allowed JPMorgan, the nation's largest bank by assets, to make up for losses in its consumer lending division.

Yet, because of the big drop in the stock market during the quarter, JPMorgan's investment banking unit wasn't as strong as in the past. Revenue fell 6 percent from a year ago to $1.4 billion as the bank earned smaller fees on equity and debt underwriting and advising on corporate dealmaking.

The Standard & Poor's 500, considered the best measure of how stocks have fared, fell 11.9 percent from April through June, its worst showing since the financial crisis devastated stocks in the fourth quarter of 2008. All the banks with big trading operations are expected to report a drop in their income from those businesses.

But a drop in loan losses helped the bank make up for the slowdown in investment banking. Revenue in the consumer lending unit jumped 10 percent from a year ago to $2 billion as the bank saw fewer loan losses across its major consumer businesses including mortgages, credit cards and student loans. However, JPMorgan Chase did report an increase in losses from commercial real estate loans, which have lagged consumer mortgages as they've gone into default.

JPMorgan's shares rose 15 cents, or .37 percent, to $40.50, in pre-opening trading.