Thursday July 16, 09:29 PM
JPMorgan profit leaps in positive sign for sector
NEW YORK (AFP) - US banking giant JPMorgan Chase surged past expectations Thursday, posting a quarterly profit of 2.7 billion dollars in a fresh sign that the troubled financial sector is on the mend.
The second-largest US bank by assets said the profit in the second quarter was a 36 percent increase over the same period last year, driven by record revenues and strong results from investment and retail banking.
Revenues jumped 41 percent from a year ago to to a record 27.7 billion dollars.
The profit translated to 28 cents per share, far above the four cents analysts had predicted. The market had also expected lower revenues of 25.9 billion dollars.
Shares in JPMorgan Chase dropped 0.36 percent to 36.13, pulling back from hefty gains a day earlier in anticipation of the results.
"JPMorgan's earnings exceeded the most positive expectations as its profits rose for the first time since 2007," said Kent Engelke, chief economic strategist at Capitol Securities Management.
The financial giant in June repaid the US government in full for the capital injection of 25 billion dollars under the Troubled Asset Relief Program (TARP), and had paid a total of 795 million dollars in dividends on the preferred stock.
JPMorgan Chase has remained profitable throughout the worst financial crisis in decades but along with other major banks accepted US government capital as part of the effort to stabilize the financial system.
The group sought to reimburse the government after so-called stress tests to ensure major banks had enough capital to withstand a deeper downturn.
The strong quarterly results came on the heels of Goldman Sachs (NYSE: GS - news) 's report of a profit of 3.44 billion dollars, also better than expected.
Despite the robust earnings, JPMorgan Chase chairman and chief executive Jamie Dimon said "these results were negatively affected by the continued high levels of credit costs in consumer lending and card services, which we expect will remain elevated for the foreseeable future."
Current-quarter earnings per share reflected a one-time, non-cash reduction of net income for common stockholders of 1.1 billion dollars, or 27 cents per share, due to the repayment of the TARP preferred capital, JPMorgan Chase said.
The firm ended the quarter with "very strong" reserves, Dimon said. Its Tier 1 capital ratio, seen as a measure of banking health, was 9.7 percent.
The additions to the company's reserves, he said, awarded it an "extremely high" loan loss coverage ratio of five percent.
"Throughout this crisis, we have remained committed to doing our part to help bring stability to the communities in which we operate and to the financial system overall," the chief executive said.
During the quarter, "we continued to lend, extending approximately 150 billion dollars in new credit to consumer and corporate customers," he added, noting the company had approved 138,000 trial mortgage modifications, bringing total foreclosures prevented since 2007 to 565,000.
Investment banking revenues grew 33 percent over the past year to 7.3 billion dollars, producing a profit of 1.47 billion dollars in the division, JP Morgan said.
Retail banking saw only a modest profit of 15 million dollars, reflecting crdit losses and the acquisition of failed thrift Washington Mutual (NYSE: WM - news) . But revenues were up 56 percent on the year to 7.97 billion dollars.
The bank's credit card division saw a net operating loss of 672 million dollars even as revenues grew 29 percent to 4.9 billion dollars.
The loss was "predominantly due to the impact of the Washington Mutual transaction, partially offset by lower charge volume and a higher level of charge-offs," the firm said.
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