JPMorgan Chase Shows How It's Done (JPM, FAS)

JPMorgan Chase & Co. (NYSE: JPM) rose about 7% yesterday ahead of this morning’s earnings announcement along with other major financial stocks, and now we know why.  Jamie Dimon and friends at one of the strongest US-banks posted earnings at $0.40 EPS vs. $0.32 estimates from Thomson Reuters; and revenues came in at $26.9 billion rather than the estimates of $22.96 billion.  So far, this is good enough that it is running the wild Direxion Financial Bull 3X Shares (NYSE: FAS) ETF.

The important notion here is that the earnings come to $2.14 billion, which is barely down from $2.37 billion a year ago.  The company’s tier-1 capital ratio came to 11.3%, or 9.2% on an ex-TARP basis.

Credit loss provisions nearly doubled to $1.2 billion for its investment bank.  It cited $10 billion in credit costs; Retail financial credit losses were $3.88 billion (was $2.7 billion last year’s same quarter).  The total credit loss allowance was put at $28 billion and its loan loss coverage ratio was 4.53%.  Dimon did note that the bank could expect to increase the loan loss reserves if the economy weakens much further.

Closed yesterday at $32.56, which is well over 100% from the 52-week lows of just under $15.00 back on just March 6, 2009.  This would still have to run just over 50% further from yesterday’s prices to hit the 52-week high of $50.63.  It is far too early to get a handle on the real trading yet, but early indications are up around $33.00 after seeing $33.50 right after the report.

If this was a report in 2007 or part of 2008, you would expect the comments to be about the end of growth and a slowing business model.  But in today’s world this shows that Jamie Dimon is the man.  We won’t be shocked at all if there is a sell-the-news reaction because it is not a normal event that you see a 100% share price gain in just over a month.  Either way, these numbers are very impressive in today’s economy.

The Direxion Financial Bull 3X Shares (FAS) is trading up over the $9.00 mark after closing at $8.86.  It is still far too early to get any solid handle on the direction here on this one as we still have nearly three hours to the open and the volume is so thin this early in the morning.

JON C. OGG