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JPMorgan: Strong Earnings, Muted Response

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EARNINGS
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JPMorgan was the first big bank to report earnings. The news? Pretty, pretty, pretty good. Here are the details.

What are the numbers?

Fourth-quarter net income jumped 48% from the year before due in part to a stronger consumer lending environment.

The bank earned $4.83 billion, or $1.12 per share. During the same quarter last year, the bank earned $3.28 billion, or 74 cents a share.

For a little perspective, the bank earned during the fourth quarter of 2008 just $0.06 a share.

What about dividends?

The strong earnings could pave the way for the bank to increase its dividend to as much as $1. Most banks had cut dividends after the financial crisis as they sought to keep cash around. But after two years of solid profits and a healthier balance sheet, the times are a-changin'.

Jason Goldberg, a senior analyst at Barclays, tells Dealbook:

“We do think dividend increases are in the cards for some…JPMorgan will be in that grouping.”

How they did it

A stronger consumer lending environment coupled with the release of $2 billion in loan loss reserves paved the way for the strong report.

In 2010, JPMorgan saw a 9% increase in new credit card accounts compared to the year before. And customers got better at paying on time, with late payments after 30 days dropping to 3.6% from 5.52% the year before.

The company added $2 billion to the amount set aside for losses in home loans from Washington Mutual, which it bought in 2008.

What about Mortgage Lawsuits?

The bank set aside $1.5 billion to cover mortgage-related litigation, a sign that lawsuits remain troublesome. But CEO Jamie Dimon remained optimistic.

"This is going to be a long, ugly mess," said Dimon, "but the important thing is it's not going to be life-threatening to JPMorgan."

Hiring and Bonuses

TheStreet.com points out that the most expensive item for the bank were costs related to hiring and bonuses.

“The firm said a rise in performance-based compensation was the biggest contributor to its $4.2 billion in noninterest expenses at its investment banking division -- a hike of 84% from the year-earlier period, and up 13% from the third quarter,” The Street reports.

The good news? If you worked at JPMorgan, you can take a fancy vacation.

Reaction on the Street

Decidedly meh. JPMorgan shares up 0.8%. Bank of America up 0.5%. Citigroup up 0.7%.
POSITION:  No positions in stocks mentioned.
TAGS:  JPMORGAN, JPMORGAN CHASE, JAMIE DIMON    SOURCE:   Dealbook
TICKERS:  NYSE:BAC, NYSE:C, NYSE:JPM, NYSE:SPY   

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