JPMorgan’s Investment Biz Pushes 1Q Profit to $3.3B

JPMorgan ChaseJPMorgan Chase reported a first quarter profit of $3.3 billion, a 55 percent jump from a year ago, led by another solid performance by its investment banking business – while reducing its reserve for credit card losses by $1 billion as delinquencies leveled off.
Chase beat Wall Street expectations with 74 cents per share earnings, compared to $2.14 billion, or 40 cents a share, a year earlier.
Most analysts had forecast 64 cents earnings-per-share for the first quarter.
Outperforming all competitors, Chase has more than muddled through losses in credit card and mortgage loan businesses with noteworthy investment services revenue.
Its Investment Bank alone saw net income of $2.5 billion, an increase of $865 million from the prior year – representing three-quarters of its first quarter 2010 profit. Investment banking fees increased 5 percent to $1.4 billion, compared to the previous year.
“The firm’s net income of $3.3 billion reflected another strong quarter for the Investment Bank, particularly in fixed income markets, and continued solid performance across Asset Management, Commercial Banking and Retail Banking,” said Chase CEO Jamie Dimon. “Unfortunately, these good results were partially offset by high losses in the consumer credit portfolios.”
Chase, the top general-purpose credit card issuer, reported a net loss of $303 million in its card services, compared with a net loss of $547 million in the prior year. The improved results were driven by the lower provision for credit losses,
The bank reduced its total provisions for credit losses in all divisions to $7 billion, compared with $8.9 billion in the previous quarter and $10 billion the year before.
The managed provision for credit card losses was $3.5 billion, compared with $4.7 billion in the prior year and $4.2 billion in the prior quarter. The current-quarter provision included a reduction of $1 billion for allowance of loan losses, “reflecting lower estimated losses, partially offset by continued high levels of charge-offs.”
Managed net revenue in its credit card business was $4.4 billion, a decrease of $682 million, or 13 percent, from the prior year. Dimon has said that the new credit card reform laws, which took effect Feb. 22 with restrictions on interest rate hikes and certain fees, would reduce card revenue significantly.
The bank’s real estate portfolios reported a loss of $1.3 billion, compared with a loss of $1.1 billion in the prior year – driven by lower net revenue and a higher provision for credit losses. The provision for real estate-tied credit losses was $3.3 billion, compared with $3.1 billion in the prior year.
Those mortgage loan reserves for the quarter reflect an addition of $1.2 billion to the allowance for loan losses for “further estimated deterioration in the Washington Mutual prime and option ARM purchased credit-impaired portfolios.”  In late 2008, Chase acquired WaMu, the largest bank failure in U.S. history.
Dimon said Chase launched expanded small business lending in the first quarter, nearly doubling originations to $2.1 billion – with a goal of increasing small business loans to $10 billion by the end 2010.
Chase has offered about 750,000 trial mortgage modifications to homeowners facing possible foreclosure – with nearly 25 percent approved for permanent monthly payment reductions. It approved 64,000 modifications during the first quarter, a 146 percent increase from the previous quarter.

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