J.P. Morgan Earnings Confusion, Huge Discount To Book Value (JPM, BAC, WFC, C, FAS)

Whether or not you like the earnings report from J.P.Morgan Chase & Co. (NYSE: JPM) probably depends upon which news outlet you read.  The earnings are lower, but by less than expected.  Earnings came in at $1.02 EPS ($4.26 billion).  Total revenue was down 0.2% at $23.8 billion.  Estimates from Thomson Reuters were $0.93 EPS and $23.53 billion for revenues.  There were many notes and exceptions to the earnings report and that make this earnings report difficult to have an apples-to-apples comparison.

The big metric that many investors are going to note is book value, which was listed as $45.93 per share.  This is versus $44.77 one quarter ago and versus $42.29 a year earlier.  Please be advised that it was just yesterday that we discussed how book value at the big banks was going to act as a ceiling rather than as a floor. 

Without an adjustment for debt valuation, the investment banking department would have been in the red as that segment saw a 13% revenue drop.  Some additional figures were as follows:

• Basel I Tier 1 Common was $120 billion, ratio of 9.9%;
• Estimated Basel III Tier 1 Common ratio was 7.7%;
• Credit reserves at $29.0 billion;
• Loan loss coverage ratio was 3.74% of total loans.

The bank also repurchased $4.4 billion of common stock during the third quarter.  Shares closed at $33.20 yesterday and the stock is indicated down 1% at $32.81 and the 52-week trading range is $27.85 to $48.36.

This has shares of Bank of America Corporation (NYSE: BAC) down 1.5%, Wells Fargo & Company (NYSE: WFC) indicated down 0.6%, and Citigroup, Inc. (NYSE: C) down 1.5% at $28.77 in pre-market trading with about two hours until the market opens.

The triple-leveraged Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is trading down almost 3% at $12.28 this morning in the pre-market.

JON C. OGG