JPMorgan Posts Profit, Sees Momentum in The Economy
JPMorgan’s first quarter results rose by 55% as the world economy shows signs of recovery after two and half years of stress.
Jamie Dimon, Chairman and Chief Executive, JPMorgan Chase, said that borrowers were showing lesser signs of defaulting and that businesses were picking up and there were strong signs of the world economy recovering. “There is clear and broad-based improvement in the economic statements in the United States and around the world,” he said. “This could be the makings of a good recovery.”
The bank’s Chase Retail Banking and credit card units’ weak performance was offset by the bank’s good profits in the investment banking division. The has also started to set aside funds to cover future losses which helped it in improving its results.
JPMorgan’s earning was 74 cents a share with a total figure being pegged at $3.3 billion. That compared with income of $2.1 billion, or 40 cents a share, a year earlier as profit surged in the months after the crisis. Revenue, at $28.2 billion, exceeded forecasts. Thomson Reuters report anticipated a forecast income of 64 cents a share on total revenues of $ 26.5 billion. The positive result has given investors something to cheer about and have also raised hopes that Bank of America, Goldman Sachs, Morgan Stanley and citigroup results are due for their results this week.
Still, Mr. Dimon said he would not consider restoring the bank’s dividend until he sees sustained improvements in the job market and fewer borrower experiencing in trouble. He also said regulators must provide more clarity on how much capital banks will be required to hold. Though the corporates have started posting positive results the jobs are yet to be back in the market. The bank has earmarked $ 7 billion to cover future losses in its consumer business and another $2.3 billion as reserves towards legal expenses on account of legal battle with Washington Mutual over that company’s remnants. The company has booked $ 1 billion in trading and securities related gains.
The credit crisis has left no bank or financial institution untouched but yet JP Morgan has been able to come out of better than the others though nobody is yet showing much confidence on Wall Street or in Washington.
Chase’s consumer businesses, however, are still hemorrhaging money. And taking a page from the Citigroup playbook, Mr. Dimon divided his Chase retail banking business into two segments for reporting purposes: its existing operations, which will continue to grow; and a holding tank to run off its most troubled loans.
The only worrying aspect for the bank has been $131 million loss of its consumer and mortgage business unit, the Chase Retail Services. Another loss making unit has been the credit card unit, Chase Card Services, which has also lost $ 303 million. Mr. Dimon said the biggest improvement in delinquencies occurred in the credit card business and said the bank might begin taking down some of its reserves in the coming months.
