JPMorgan Chase & Co. (JPM), bracing itself for more loan losses driven by the recession, delivered surprisingly strong first quarter results on Thursday.
Carried mainly by a recovery in securities trading that lifted JPMorgan Chase's investment banking revenue to a record, the bank said it's strong enough to pay back the U.S. Treasury Department even as it had to set more money aside for rising delinquencies and loan losses. Bond trading took away much of the pain from the recession.
JPMorgan Chase's profit for the quarter fell 10% from a year earlier, to $2.1 billion, but revenue jumped 48%, to $25.03 billion. The bank's shares rose about 1% in recent trading, to just almost $33.
Write downs related to illiquid, or so called toxic, securities and loans are "getting to be much less noteworthy," Chief Financial Officer Michael Cavanagh told investors during a conference call. However, JPMorgan Chase set aside $4.2 billion to cover future loan losses, $100 million more than in the fourth quarter - more than some analysts had expected.
JPMorgan Chase has a war chest of $28 billion to cover future loan losses, and that reserve is "staggeringly high" for some loan portfolios, Cavanagh said. Loan losses are expected to continue to rise, but not more so than previously expected, he said.
A few points:
-- Thank God for trading desks.
-- Revenue was up and profit was down. That tells us internal costs are an issue
-- Hearing the writedowns are less of a problem is good news
-- They have a huge loan loss reserve set aside
Citigroup Inc., the U.S. bank rescued by $45 billion in U.S. taxpayer funds, ended a five- quarter losing streak with a $1.6 billion profit on trading gains and an accounting benefit for companies in distress.
Citigroup surged 17 percent in New York trading. The first- quarter profit compared with a net loss of $5.11 billion, or 34 cents, a year earlier, the New York-based bank said. On a per- share basis, the bank reported an 18-cent loss because of costs related to preferred dividends. The average estimate of 13 analysts surveyed by Bloomberg was a loss of 32 cents.
Citigroup investors hadn’t seen a profit since before Chief Executive Officer Vikram Pandit took over in 2007. While the bank cut compensation costs and took fewer writedowns, it couldn’t halt rising delinquencies on home and credit-card loans. Citigroup benefited from higher fixed-income trading revenue that also bolstered earnings at Goldman Sachs Group Inc. and JPMorgan Chase & Co.
A few points:
-- Again, thank God for trading desks
-- I am wary of any changes related to "accounting" changes. That implies there is a nice little gimmick going on rather than a real fundamental change
And finally, there is Goldman's Profits:
Goldman, which had been expected to report earnings Tuesday morning, said it earned $3.39 per share, beating the Thomson Reuters average estimate of $1.67. The company reported net revenue of $9.43 billion, also easily outpacing the $7.19 billion expected by analysts.
The largest segment of Goldman's revenues came from "trading and principal investments" in its fixed-income currencies and commodities division.
Again -- thank God for trading desks.