Chillin' out till it needs to be funded
Bank results season began with a bang, JPM running up 3% and talking confidently about introducing new credit card products and improving Auto loans and home loans outside of the added impairment / delinquencies in the WaMu portfolio. JPM Chase card portfolio reserves have increased by $1 billion and the WaMu loans portfolio by $1.2 billion. There were $2.3 litigation reserves added for mortgages even as profits were reported in credit costs to the tune of $462 million. Lot of Financial Accounting matters taking away the result away from Cash and bringing another situation where they won’t too if they have cash to last the day. Maybe not at JP Morgan, but somewhere else like AIG FP.
J P Morgan was also in a happy mood dismissing the bank fee as a punitive tax and Dimon could happily proclaim his team as the leader in the space with #1 position in Global Investment Banking fees. They produced another $3.3 billion quarter even with a high 20s / low 30s tax rate. Jamie Dimon also reportedly dismissed the possibilities of a double dip recession while continuing with caution on the Economy. ( rising rate environment, but the economy doing well so its fine)
$8.3 billion trading revenues is not proprietary trading and ‘a lot of client flow’ Rising rates do not hurt trading results but the quarter was a standalone and may not be reproducible again through 2010. Trading revenues will be lower and not impacted by any new legislation. Most of this opinion is as verified by Dimon’s team on the earnings call. All geographies did well in this quarter.
JP Morgan thinks Basel 3 impact would be minimised as it comes closer to rolling out and the European banks would have to bother about the numbers like holding 30% of the retail deposits in reserve in case of a run on the bank.
The good news:(from the Jpmorgan.com press release)
Balance sheet remained very strong: Tier 1 Capital of $131.4 billion, or 11.5%, and Tier 1 Common1 of $104.0 billion, or 9.1% (estimated)
More than $145 billion in new credit provided during the quarter, with continued focus on preventing foreclosures:
– 4.0 million new card, home equity, mortgage and auto loans
– Small-business credit originations of $2.1 billion across all businesses
– 64,000 permanent mortgage modifications approved during the quarter; more than 750,000 modifications offered and nearly 185,000 approved since beginning of 2009
$230 billion in Mortgage assets of which $130 bn are WaMu assets which would have more rundowns throughout 2010.
zyakaira’s Lookahead: JPM thinks the economy can take rising rates on their loans as well and will continue to improve on non Wamu loans as consumption takes off. WaMu in the mean time is planning to buiy back its cheap sell to JPM and the Government will be in the market to sell $86 billion of AIG ($48) , Cit ($32) and GMAC($6) JPM luckily won’t be in to do equity capital raising while its Tier I is comfortable at near 12%