Wednesday, 13 April 2011

J.P. Morgan quarterly profit jumps 67% Lower credit costs buoy results of banking bellwether

By Alistair Barr and Greg Morcroft,
J.P. Morgan Chase & Co. reported a 67% jump in quarterly profit Wednesday, as credit costs dropped at the second-largest U.S. bank by assets.

The bank also increased its quarterly dividend to 25 cents a share from 5 cents a share and set plans to buy back $8 billion in stock this year as part of a $15 billion stock-repurchase program.

J.P. Morgan /quotes/comstock/13*!jpm (JPM 46.42, -0.23, -0.48%) said its first-quarter net income rose to $5.6 billion, or $1.28 a share, from $3.3 billion, or 74 cents a share, in the year-ago period. Quarterly revenue fell to $25.2 billion from the year-earlier $27.7 billion.

On average, analysts expected the investment bank to earn $1.15 a share on revenue of $25.2 billion, according to a survey by FactSet Research.

“We strengthened our fortress balance sheet, ending the first quarter with a strong Tier 1 Common ratio of 10.0%,” said Chief Executive Jamie Dimon in a press release. “Looking forward, we intend to operate the business with the objectives of maintaining a Basel I Tier 1 Common ratio of at least 9.0% and meeting the Basel III requirements substantially ahead of time.”

J.P. Morgan is the first major U.S. bank to report first-quarter results. The company is a big player in all major banking businesses, including investment banking and trading, retail banking, credit cards, mortgages, commercial lending, treasury and securities services and asset management. That means its results are closely watched for clues on how such rivals as Bank of America Corp. /quotes/comstock/13*!bac (BAC 13.31, -0.16, -1.19%) , Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.49, -0.06, -1.32%) and Wells Fargo & Co. /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 30.92, -0.48, -1.53%) performed in the same period.

Big banks like these have recovered from the 2008 financial crisis, with help from hundreds of billions of dollars in government support and monetary stimulus.

As the U.S. economy has recovered, defaults on mortgages and other loans have declined. That has boosted earnings at the banks, which have set aside less money to cover bad loans and have even released cash from loan-loss reserves.

J.P. Morgan’s Retail Financial Services unit reported a net loss of $208 million, compared with a net loss of $131 million in the prior year. Net revenue was $6.3 billion, down 19% from a year ago.

The provision for credit losses was $1.3 billion, down $2.4 billion from a year ago and down by $1.1 billion from the prior quarter.

J.P. Morgan’s Investment Bank reported first-quarter net income of $2.4 billion, down 4% from the year-ago quarter.

Net revenue generated by the company’s investment bank was $8.2 billion, just shy of the year-ago $8.3 billion.

Alistair Barr is a reporter for MarketWatch in San Francisco.
Greg Morcroft is MarketWatch's financial editor in New York

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