JPMorgan Sets Very High Bar For Financial Peers (JPM, FAS)

J.P. Morgan Chase & Co. (NYSE: JPM) has just posted very impressive earnings.  The cleanest bank in America reported earnings of $0.82 EPS and revenues were $26.62 billion versus $0.52 EPS and almost $25 billion in revenues.  To compare these earnings, this translates to $3.6 billion in net income versus $527 million a year ago.  The results are strong enough that it has set a very high bar for its peers and the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is soaring on the news.

The company noted some signs of a consumer credit stabilization, but hedged it by noting that they are uncertain if the trends will continue.  The company noted that growth in its investment bank, asset management, commercial banking and retail banking were its strengths; but it also noted high credit costs that are expected to remain elevated.

The Tier-1 common ratio was 8.2% and the Tier-1 capital ratio was 10.2%.  The company added $2 billion to its consumer credit reserves to come to $31.5 billion or 5.3% of total loans.  The provision for credit losses increased to $379 million (up from $234 million a year ago), which reflected higher charge-offs of $750 million that were offset by a reduction of $371 million in the allowance for credit losses.  Consumer Lending reported a net loss of $1.0 billion and its card services reported a net loss of $700 million.

JPMorgan stock closed at $45.66 and shares are trading above $47.00 in pre-market trading.  Go ahead and mark that as a 52-week high as the prior high was $46.50.  The ultra-leveraged Direxion Daily Financial Bull 3X Shares (NYSE: FAS) appears to be soaring on thin volume as there is 2 hours and 15 minutes until the open.  The FAS is trading up above $89.00 after closing at $85.91 yesterday.

JON C. OGG
October 14, 2009