The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Bank Results Season: JP Morgan prints $0.27 EPS in Retail, loses $0.34 in Mortgages

JP Morgan Chase Tower

Image via Wikipedia

JP Morgan results presentation is online with $5.4 bln in Income scoring a good $1.27 in EPS for them . That is just the headline number though. With $1 bln lower Cards reserves but higher Foreclosure expenses and mortgages litigation allowances of $2.3 bln the bank has given away $0.07 cents before any business items. The fortress Balance sheet is also showing a deprecation of on the Basel III Tier I common to barely 7.2% . It was $130 bln in the previous quarter investments rose by $800 mln to add the other $0.12 cents to the EPS

Exposure to Europe

According to the CFO, Doug, the bank has a gross exposure across Swaps and Options and Third Party external exposure to $15 bln and likely maximum losses of not more than $3 bln. In fact according to the CFO, the Gross Exposure value of $15 bln, mostly in Spain and Italy would mean maximum exposure net of $1.5 bln

RWA and Basel III/Dodd Frank Capital

According to the CFO, Our RWA will decrease and with natural run offs and natural mitigation we will always have excess capital and at least 7.5% and that will in fact drive up very fast allowing JPM to deploy larger not smaller balance sheets

Results

However, the proof of the J P Morgan champion’s pudding is in the Top line Revenue is up 6% Q-o-Q and the bank is going to be ripe plucking in early trades. The Topline of $27.4 bln is helped by the #1 rank in dealmaking with Investment Bank revenues a key $7.35 bln. Investment Bank costs are down 4% yoy on lower compensation costs and the profit a clean $2.1 bln out of the overall $5.4 bln. Retail Banking profits meanwhile were barely half of the Q2 last year at $580 mln and Auto loans originations down 7% to $5 bln. Mortgage originations at $34 bln and deposits at $356 bln were barely up but revenues much higher at $7.975 bln mostly eaten up by record expenses of $5.6 bln in RFS. While banking income was up, RFS was hit by additional foreclosure expenses of more than a $1 billion.

Last but not the least with card charge offs down to 5.2% on the core portfolio, Credit Cards turned out a neat $911 million in profit. All in all a slam dunk by the bank despite the overhang of its Real Estate / mortgage Loan Portfolio

Commercial Banking and Asset management continue to try for cross sell with Comml Banking loan balances up to $103 bln and IB income on the Comml Bank clients of $442 mln

International income made 55% of total Treasury performance. 9 consecutive quarters of Assets balances moving up for Asset management (AUM) still at $1.3 tln. Asset management expenses are up 28% with higher staffing and performance based comp as it ramped up its Fixed income funds flows in the last 2 years. Comml Banking expenses are also up year on year (4%) but overall lower employee compensation has resulted in single digit gains on the bank’s expenses

PE gains were a good 9% of its nearly $9bln portfolio. As per questions by Mike Mayo of CLSA answered here, Syndicated Loans were less than 20% of the $1.9 bln Fee income in Investment Banking and Asia was not a significant deal playground in terms of value for JP Morgan. Also its credit exposures are mostly swaps products and gross exposure is counted on the nominal thus losses and premiums paid are unlikely to be more than 10% of that gross exposure.(Spain and Italy, Greece and Germany)

Category:JPMorgan Chase

Image via Wikipedia

Enhanced by Zemanta

2 comments on “Bank Results Season: JP Morgan prints $0.27 EPS in Retail, loses $0.34 in Mortgages

  1. Pingback: Bank Results Season: Citicorp revenues exceed $16.3 bln, book value up to $49 | The Banking and Strategy Initiative

  2. Pingback: Bank results Season: Morgan Stanley gets a busy underwriting season | The Banking and Strategy Initiative

Comments are closed.

Archives

%d bloggers like this: