Chillin' out till it needs to be funded
Big banks are going to reporting 37% higher business from Mortgages this quarter sequentially and that includes J P Morgan as a proud #2 in the business, behind Wells Fargo.
The Earnings season is off with a great report as J P Morgan opened its account with $47B in mortgages and $5.7B in Net Income, bringing back hopes on the street for a $100B 2012 from the bank that finally went under last two quarters having reported a meagre revenue of $22.8 B in June, hit by the London Whale taking it out on Index derivatives CDS bets. While the CIO Office positions have been totally closed, the difference on the Topline has directly accrued to profits as theCorporate and Proprietary division avoided further selling off in losses and the EPS achieved by the bank at $1.40 is ahead of most predictions for Q2 and Q# incomes before Bruno Iskil and Ira Sohn started dominating the storm and the tea cup.
Global Investment Banking added to the celebrations with the bank cementing its lead in the Investment Banking divisions across Bonds, Debt and M&A even as equities start making a comeback in Q3 and Q4 o f this year. The Bank reported $6.3B in its Investment Banking division, next only to $87 B from its Retail Financial Services unit which houses the mortgages. Profits from Investment banking are still almost lower by 18% from the June quarter on a lower topline but could see the bank coming back to its $2 B Profit run rate in the business sooner than later with municipals, high yield and corporate debt but without a strong win in Asia this year.
Extraneous changes to the bottomline from lower loan losses and redeemed TruPS (Trust preferred securities recently deemed ineligible for Tier I considerations) ere matched by higher litigation reserves and incremental charge offs on Real Estate Portfolios.
The bank’s press reelease attributes the drop of $0.3 B in Fee income in Consumer and Business Banking to loss of income on Debit Cards from the Durbin amendment. Retail Income also suffered on account of lower deposit margins but the bank made that up on higher balances reporting almost static $2.7B in NII on Retail lending. Deposit margin of 2.56% is still ahead of the competition while average deposits increased 9% from last year to $394 B and number of branches increased by 200 to 5596. Sales of New credit cards were down 16% over last year at the branches while SNME lending was up by $18.6 B
Mortgage Production and Servicing profits jumped $358 M to $563 M while Pre Tax Income almost doubled to $1.1 B with HARP and the prevailing low rate
Card Services and Auto Division ( Personal Unsecured lending) gre to revenues of $4.753 B in the quarter and accounted for another $1B of Profits at $954 M while Commercial Banking dre out a par $1.7 B in revenues and $690 M in Net Income up 21% on the year
RoE on Commercial Banking was up to 29% and that on Investment Banking was also a good 16% The bank’s Net Operating Expenses were up 3% sequentially and the Revenues of $25.873 B gross 9 mopnths revenues to $71 B ytd and the bank could likely not make its much vaunted $100B benchmark this year
The Bank’s Basel 3 Capital ratio has further jumped to 8.4% this quarter T he last two columns below refer YTD data with the seond and third columns 2Q12 and 3Q11 respectively
The bank has just started its Press conference for the results