Chillin' out till it needs to be funded
As mentioned yesterday, the leading lights of banking, now that Wall street is not the same, still managed to eke out $3.7bln in Income (Net Profit) on a $21 bln quarter to close 2011 with $97.234 bln revenues and a $18.976 bln profit. The last quarter included a freah $2 bln in loan loss provisions
The 90 cents earnings for December, led to a $4.48 score for the whole year, probably brightening Friday unless the beat as recorded is penalised for not hitting $100 bln revenues, as being JP Morgan hurts right now
Its Tier I common of 10% already includes its imputed charge at the top of the G-SIFI institutions, and Tier I Capital of 12.5% is a good adequately funded bank that can go aggressively after Credit growth to at least 20% from a loan book of $723 bln on deposits of $1.1 tln. Despite being no. 2 the bank ended with $6.79 bln profits from investment banking for 2011, adding only $726 mln in the December quarter
December saw maximum contribution from Auto and Credit Card loans with $1.1 bln in profit, which brought PFS to no. 2 in profits rank in the bank with $4.59 bln profits. DVA impact was a negative $750 mln in Investment banking unit mostly.
Commercial Bank, Asset Management and Treasury Services maintained their shares from last year apart from the gains in PFS share in the balance sheet
Principal Transactions and Asset Management accounted for most of the full year revenue at $10 bln and $14 bln respectively, Return on Tangible common equity up to a high 15% from the gains in PFS and high underwritingbusiness of $3 bln in FI and $1.2 bln in equities. Fee Advisory income aftert the T Mobile drop was still $1.8 bln, up 22% from last year
Compensation was 30% of revenues for the year
The Q4 Return on TCE was down to 11% and ROE a low 8% showing up as a trending number for the first couple of quarters of 2012
Equity revenues are down on lower volumes, PFS down 15% from September, Credit losses in retail much higher at $700 mln while delinquencies have started moving north from Q4 while Card Outstandings have come to a EOP balance of $120 bln
Best summed up as makign good on a bad year, the bank added 8.5 mln cardholders and issued 765k mortgages in the year with commercial banking and Treasury service income trending lower on lower market volumes and fees.
The bank has added 17,000 jobs for the year.
The conference starts in an hour.
Some important Snippets of Dimon speak( in note language for serious industry commentators alone!) which speak to the outlook for US economy in 2012, Basel 3 and the importance of being JP Morgan
Employment should increase first.
Chargeoffs can start coming down fast if at least pricing starts improving in housing market
How Basel impact: We are not going to buy a 8% yield security because Basel 3 by default requires a 12.5% capital charge and that pre tax return comes down to 5.5% > Economy will go down
We now fund banks but with charges on capital we have a bad policy but nonetheless there will not be in the interbank market at all
CNBF, Trade Fin, Aircraft, some are coming through
Basel 3 benefits early
We will go close to 9 but do 9 only in 2018 but we want to get it behind us.
Bank investments in the new macro enviroment and regulations
Branch investments do not turnaround on day 1 market expectations need to change and Low interest ./ Non interest bearing deposits are of value to us and we have decided their value is not directed by the interest we get on the deposits
There is still a huge drag on mortgage that needs to disappear. We need 125 new branches esp in California and Florida. United States are still too many banks in a so called too big to fail regime, business fragmented and impact of regulations worse on the smaller on the banks