Chase Profit Soars – But Mortgage, Credit Card Losses Mount

ChaseMounting losses on mortgages and credit cards overshadowed an impressive fourth quarter performance in overall profit from JPMorgan Chase, the top credit card issuer and the nation’s second largest bank by assets.
Chase today reported fourth quarter profit of $3.3 billion, or 74 cents a share, compared with $702 million, or 6 cents a share a year earlier, beating most analysts expectations.
For 2009, Chase reported net Income of $11.7 billion, or $2.26 per share, on record revenue of $108.6 billion.
Despite the earnings performance, shares for Chase were down in early trading as investors expressed concerns over the banking giant’s losses in its mortgage and commercial loan divisions and persistent credit card delinquencies – – possibly pointing to a precarious 2010 for one of the better-managed banks.
“Though these results showed improvement, we acknowledge that they fell short of both an adequate return on capital and the firm’s earnings potential,” Chase CEO Jamie Dimon said in a statement. “We benefited from the diversity of our leading franchises, as demonstrated by the continued earnings strength of our Investment Bank, Commercial Banking, Asset Management and Retail Banking franchises.”
However, the bank’s mortgage and credit card businesses were hit with big losses that were offset by record investment banking revenue.
The provision for credit losses was $4.2 billion, an increase of $653 million from the prior year and $241 million from the prior quarter. The provision included an addition of $1.5 billion to the allowance for loan losses, compared with additions of $1.9 billion in the prior year and $1.4 billion in the prior quarter.
“Weak economic conditions and housing price declines continued to drive higher estimated losses for the mortgage and home equity portfolios,” Chase said.
Loan loss reserves in its commercial banking unit increased to $494 million from $190 million. Prime mortgage net charge-offs – loans the bank does not expect to be repaid – increased significantly to $568 million, or 3.81 percent, from $195 million, or 1.2 percent, a year earlier.
Branch sales of credit cards decreased 31 percent from the prior year and 6 percent from the prior quarter.
Its Investment Bank results, though, were impressive with a 38 percent increase – net income was $1.9 billion, an increase of $4.3 billion from the prior year.
“While we are seeing some stability in delinquencies, consumer credit costs remain high, and weak employment and home prices persist,” Dimon said. “Accordingly, we remain cautious.”

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