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Last Update: 13-Oct-11 09:52 ET
JPMorgan Chase Tops Third Quarter Expectations
JPMorgan Chase (JPM $31.71 -1.49) reported third quarter earnings of $1.02 per share, $0.08 better than the Capital IQ Consensus Estimate of $0.94.
Revenues rose 0.1% year/year to $24.37 billion versus the $23.27 billion consensus. Co reported third-quarter 2011 net income of $4.3 billion, compared with net income of $4.4 billion in the third quarter of 2010, representing a 13% return on tangible common equity.
Several significant items including a $542 million pretax loss in Private Equity, $1.0 billion pretax of additional litigation expense in Corporate and a $1.9 billion pretax DVA gain ($0.29). Jamie Dimon said, 'The DVA gain reflects an adjustment for the widening of the Firm's credit spreads which could reverse in future periods and does not relate to the underlying operations of the company. All things considered, we believe the Firm's returns were reasonable given the current environment'.
The impact on the bottom line for these results were as follows: $1.9 billion pretax ($0.29 per share after-tax) benefit from debit valuation adjustment ("DVA") gains in the Investment Bank, resulting from widening of the Firm's credit spreads $542 million pretax ($0.09 per share after-tax) Private Equity loss $1.0 billion pretax ($0.15 per share after-tax) additional litigation expense, predominantly for mortgage-related matters, in Corporate.
Fortress Balance Sheet: Basel I Tier 1 Common1of $120 billion, ratio of 9.9%; estimated Basel III Tier 1 Common ratio of 7.7%... JPM repurchased $4.4 billion of common stock during the third quarter; Credit reserves at $29.0 billion; loan loss coverage ratio 3.74% of total loans.
Loan Activity: Over $1.3 trillion in new and renewed credit provided to and capital raised for consumers, corporations, small businesses, municipalities and not-for-profits year-to-date: Small business loan originations of $12.6 billion, up 71% compared with prior year-to-date and 133% compared with the same period in 2009; Middle-market loans of $41.5 billion, up 18% compared with prior year; Trade finance loans of $30.1 billion, up 69% compared with prior year.
Investment Banking: Net income was $1.6 billion, up 27% from the prior year. Higher net revenue was partially offset by an increased provision for credit losses and higher noninterest expense. Net revenue included a $1.9 billion gain from debit valuation adjustments ("DVA") on certain structured and derivative liabilities, resulting from the widening of the Firm's credit spreads. This was partially offset by a $691 million net loss, including hedges, from credit valuation adjustments ("CVA") on derivative assets within Credit Portfolio, due to the widening of credit spreads for the Firm's counterparties. Net revenue was $6.4 billion, compared with $5.4 billion in the prior year. Investment banking fees were down 31% to $1.0 billion, consisting of debt underwriting fees of $496 million (down 37%), equity underwriting fees of $178 million (down 47%) and advisory fees of $365 million (down 5%). Fixed Income Markets revenue was $3.3 billion, up 7% (down 14% excluding DVA gains of $529 million). These results reflected solid revenue from rates and currency-related products, partially offset by lower results in credit-related products. Equity Markets revenue was $1.4 billion, up 25% (down 15% excluding DVA gains of $377 million). These results reflected solid client revenue, partially offset by the impact of challenging market conditions. Credit Portfolio revenue was $578 million, including DVA gains of $979 million and net interest income and fees on retained loans, largely offset by net CVA losses of $691 million.
RFS: The provision for credit losses was $1.0 billion, a decrease of $370 million from the prior year and an increase of $33 million from the prior quarter.
Revenues rose 0.1% year/year to $24.37 billion versus the $23.27 billion consensus. Co reported third-quarter 2011 net income of $4.3 billion, compared with net income of $4.4 billion in the third quarter of 2010, representing a 13% return on tangible common equity.
Several significant items including a $542 million pretax loss in Private Equity, $1.0 billion pretax of additional litigation expense in Corporate and a $1.9 billion pretax DVA gain ($0.29). Jamie Dimon said, 'The DVA gain reflects an adjustment for the widening of the Firm's credit spreads which could reverse in future periods and does not relate to the underlying operations of the company. All things considered, we believe the Firm's returns were reasonable given the current environment'.
The impact on the bottom line for these results were as follows: $1.9 billion pretax ($0.29 per share after-tax) benefit from debit valuation adjustment ("DVA") gains in the Investment Bank, resulting from widening of the Firm's credit spreads $542 million pretax ($0.09 per share after-tax) Private Equity loss $1.0 billion pretax ($0.15 per share after-tax) additional litigation expense, predominantly for mortgage-related matters, in Corporate.
Fortress Balance Sheet: Basel I Tier 1 Common1of $120 billion, ratio of 9.9%; estimated Basel III Tier 1 Common ratio of 7.7%... JPM repurchased $4.4 billion of common stock during the third quarter; Credit reserves at $29.0 billion; loan loss coverage ratio 3.74% of total loans.
Loan Activity: Over $1.3 trillion in new and renewed credit provided to and capital raised for consumers, corporations, small businesses, municipalities and not-for-profits year-to-date: Small business loan originations of $12.6 billion, up 71% compared with prior year-to-date and 133% compared with the same period in 2009; Middle-market loans of $41.5 billion, up 18% compared with prior year; Trade finance loans of $30.1 billion, up 69% compared with prior year.
Investment Banking: Net income was $1.6 billion, up 27% from the prior year. Higher net revenue was partially offset by an increased provision for credit losses and higher noninterest expense. Net revenue included a $1.9 billion gain from debit valuation adjustments ("DVA") on certain structured and derivative liabilities, resulting from the widening of the Firm's credit spreads. This was partially offset by a $691 million net loss, including hedges, from credit valuation adjustments ("CVA") on derivative assets within Credit Portfolio, due to the widening of credit spreads for the Firm's counterparties. Net revenue was $6.4 billion, compared with $5.4 billion in the prior year. Investment banking fees were down 31% to $1.0 billion, consisting of debt underwriting fees of $496 million (down 37%), equity underwriting fees of $178 million (down 47%) and advisory fees of $365 million (down 5%). Fixed Income Markets revenue was $3.3 billion, up 7% (down 14% excluding DVA gains of $529 million). These results reflected solid revenue from rates and currency-related products, partially offset by lower results in credit-related products. Equity Markets revenue was $1.4 billion, up 25% (down 15% excluding DVA gains of $377 million). These results reflected solid client revenue, partially offset by the impact of challenging market conditions. Credit Portfolio revenue was $578 million, including DVA gains of $979 million and net interest income and fees on retained loans, largely offset by net CVA losses of $691 million.
RFS: The provision for credit losses was $1.0 billion, a decrease of $370 million from the prior year and an increase of $33 million from the prior quarter.
