JPMorgan Chase: Loan Reserve Cut Boosts 2Q Profit to $4.8 Billion

JPMorgan ChaseDeclines in loan charge-offs and delinquencies prompted a $1.5 billion reduction in loan reserves by JPMorgan Chase in the second quarter of 2010, and that helped boost earnings to $4.8 billion, compared to $2.7 billion a year ago.
JPMorgan’s second-quarter earnings of $1.09 a share beat most analysts forecast of 67 cents a share – excluding the lower loan-loss provision.
Chase is the second largest U.S. bank by assets and the top general-purpose credit card issuer.
Despite the 76 percent jump in profit, JPMorgan Chairman and CEO Jamie Dimon issued a somewhat ominous statement on the uncertain impact from pending regulatory reform that is expected to be signed into law by President Obama within days.
Dimon said he welcomed reform that will include “systemic risk oversight,” but he then added:
“However, many challenges and uncertainties remain which may result in unintended consequences for our clients, the markets and our businesses,” Dimon said. “With a need for global regulatory coordination and hundreds of rules to be written, increased focus is critical in order to implement these reforms in a way that protects consumers and the competitiveness of the U.S. financial system, while ensuring the flow of safe and sound credit.”
Much uncertainty remains, with Dimon issuing a reminder that charge-offs and delinquencies “remain at extremely high levels and therefore returns in our consumer-lending businesses are still unacceptable.”
The bank wrote off 3.28 percent of the loans on an annualized basis, down from 4 percent a year earlier, the figures includes an accounting adjustment.
Fixed income trading has been a key source of profits for JPMorgan and other major banks for several quarters since the onset of the financial crisis.
But JPMorgan’s revenue from fixed income, commodities and currency trading was down 28 percent to $3.56 billion in the second quarter.
See JPMorgan’s news release on earnings.