JPMorgan Chase & Co. (NYSE: JPM) reported its second-quarter net income soared 77 percent to $4.8 billion as a slowdown in losses from failed loans helped offset a difficult spring in trading and investment banking.
JPMorgan Chase surpassed analysts’ expectations as it earned $1.09 a share, up from $2.7 billion, or 28 cents a share, a year earlier. Analysts had forecast a profit of 67 cents per share in the just-ended quarter, according to Reuters.
Jamie Dimon, Chairman and Chief Executive Officer, commented on the quarter: “Our net income increased to $4.8 billion, including the benefit from a $1.5 billion reduction of loan loss reserves – which we do not believe represents normal ongoing earnings – partially offset by a charge of $550 million for the U.K. bonus tax.”
Continuing on the businesses, Dimon added: “Although we are gratified to see consumer-lending net charge-offs and delinquencies decline, they remain at extremely high levels and therefore returns in our consumer-lending businesses are still unacceptable. As a result, these businesses did not meet expectations nor generate satisfactory returns on capital for our shareholders. It is too early to say how much improvement we will see from here.
“We saw solid performance in our other businesses. In particular, our wholesale businesses experienced reduced net charge-offs that led to reductions in loan loss reserves, and are currently seeing credit costs which reflect the increasingly healthy condition of our wholesale clients.”
| JPMORGAN CHASE & CO. | |||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||||||||||||
| (in millions, except per share, ratio and headcount data) | |||||||||||||||||||||||||||||||||||
| QUARTERLY TRENDS | YEAR-TO-DATE | ||||||||||||||||||||||||||||||||||
| 2Q10 Change | 2010 Change | ||||||||||||||||||||||||||||||||||
| 2Q10 | 1Q10 | 2Q09 | 1Q10 | 2Q09 | 2010 | 2009 | 2009 | ||||||||||||||||||||||||||||
| SELECTED INCOME STATEMENT DATA: | |||||||||||||||||||||||||||||||||||
| Reported Basis | |||||||||||||||||||||||||||||||||||
| Total net revenue | $ | 25,101 | $ | 27,671 | $ | 25,623 | (9 | ) | % | (2 | ) | % | $ | 52,772 | $ | 50,648 | 4 | % | |||||||||||||||||
| Total noninterest expense | 14,631 | 16,124 | 13,520 | (9 | ) | 8 | 30,755 | 26,893 | 14 | ||||||||||||||||||||||||||
| Pre-provision profit | 10,470 | 11,547 | 12,103 | (9 | ) | (13 | ) | 22,017 | 23,755 | (7 | ) | ||||||||||||||||||||||||
| Provision for credit losses | 3,363 | 7,010 | 8,031 | (52 | ) | (58 | ) | 10,373 | 16,627 | (38 | ) | ||||||||||||||||||||||||
| NET INCOME | 4,795 | 3,326 | 2,721 | 44 | 76 | 8,121 | 4,862 | 67 | |||||||||||||||||||||||||||
| Managed Basis (a) | |||||||||||||||||||||||||||||||||||
| Total net revenue | $ | 25,613 | $ | 28,172 | $ | 27,709 | (9 | ) | (8 | ) | $ | 53,785 | $ | 54,631 | (2 | ) | |||||||||||||||||||
| Total noninterest expense | 14,631 | 16,124 | 13,520 | (9 | ) | 8 | 30,755 | 26,893 | 14 | ||||||||||||||||||||||||||
| Pre-provision profit | 10,982 | 12,048 | 14,189 | (9 | ) | (23 | ) | 23,030 | 27,738 | (17 | ) | ||||||||||||||||||||||||
| Provision for credit losses | 3,363 | 7,010 | 9,695 | (52 | ) | (65 | ) | 10,373 | 19,755 | (47 | ) | ||||||||||||||||||||||||
| NET INCOME | 4,795 | 3,326 | 2,721 | 44 | 76 | 8,121 | 4,862 | 67 | |||||||||||||||||||||||||||
| PER COMMON SHARE DATA: | |||||||||||||||||||||||||||||||||||
| Basic Earnings | |||||||||||||||||||||||||||||||||||
| Net income | 1.10 | 0.75 | 0.28 | 47 | 293 | 1.84 | 0.68 | 171 | |||||||||||||||||||||||||||
| Diluted Earnings (b) | |||||||||||||||||||||||||||||||||||
| Net income | 1.09 | 0.74 | 0.28 | 47 | 289 | 1.83 | 0.68 | 169 | |||||||||||||||||||||||||||
| Cash dividends declared | 0.05 | 0.05 | 0.05 | – | – | 0.10 | 0.10 | – | |||||||||||||||||||||||||||
| Book value | 40.99 | 39.38 | 37.36 | 4 | 10 | 40.99 | 37.36 | 10 | |||||||||||||||||||||||||||
| Closing share price | 36.61 | 44.75 | 34.11 | (18 | ) | 7 | 36.61 | 34.11 | 7 | ||||||||||||||||||||||||||
| Market capitalization | 145,554 | 177,897 | 133,852 | (18 | ) | 9 | 145,554 | 133,852 | 9 | ||||||||||||||||||||||||||
| COMMON SHARES OUTSTANDING: | |||||||||||||||||||||||||||||||||||
| Weighted-average diluted shares | 4,005.6 | 3,994.7 | 3,824.1 | – | 5 | 4,000.2 | 3,791.4 | 6 | |||||||||||||||||||||||||||
| Common shares at period-end | 3,975.8 | 3,975.4 | 3,924.1 | – | 1 | 3,975.8 | 3,924.1 | 1 | |||||||||||||||||||||||||||
| FINANCIAL RATIOS: (c) | |||||||||||||||||||||||||||||||||||
| Net income: | |||||||||||||||||||||||||||||||||||
| Return on equity (“ROE”) (b) | 12 | % | 8 | % | 3 | % | 10 | % | 4 |
%
|
|||||||||||||||||||||||||
| Return on tangible common equity (“ROTCE”) (b)(d) | 17 | 12 | 5 | 15 | 6 | ||||||||||||||||||||||||||||||
| Return on assets (“ROA”) | 0.94 | 0.66 | 0.54 | 0.80 | 0.48 | ||||||||||||||||||||||||||||||
| CAPITAL RATIOS: | |||||||||||||||||||||||||||||||||||
| Tier 1 capital ratio | 12.1 | (g) | 11.5 | 9.7 | |||||||||||||||||||||||||||||||
| Total capital ratio | 15.8 | (g) | 15.1 | 13.3 | |||||||||||||||||||||||||||||||
| Tier 1 common capital ratio (e) | 9.6 | (g) | 9.1 | 7.7 | |||||||||||||||||||||||||||||||
| SELECTED BALANCE SHEET DATA (Period-end) (f) | |||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,014,019 | $ | 2,135,796 | $ | 2,026,642 | (6 | ) | (1 | ) | $ | 2,014,019 | $ | 2,026,642 | (1 | ) | |||||||||||||||||||
| Wholesale loans | 216,826 | 214,290 | 231,625 | 1 | (6 | ) | 216,826 | 231,625 | (6 | ) | |||||||||||||||||||||||||
| Consumer loans | 482,657 | 499,509 | 448,976 | (3 | ) | 8 | 482,657 | 448,976 | 8 | ||||||||||||||||||||||||||
| Deposits | 887,805 | 925,303 | 866,477 | (4 | ) | 2 | 887,805 | 866,477 | 2 | ||||||||||||||||||||||||||
| Common stockholders’ equity | 162,968 | 156,569 | 146,614 | 4 | 11 | 162,968 | 146,614 | 11 | |||||||||||||||||||||||||||
| Total stockholders’ equity | 171,120 | 164,721 | 154,766 | 4 | 11 | 171,120 | 154,766 | 11 | |||||||||||||||||||||||||||
| Headcount | 232,939 | 226,623 | 220,255 | 3 | 6 | 232,939 | 220,255 | 6 | |||||||||||||||||||||||||||
| LINE OF BUSINESS NET INCOME/(LOSS) | |||||||||||||||||||||||||||||||||||
| Investment Bank | $ | 1,381 | $ | 2,471 | $ | 1,471 | (44 | ) | (6 | ) | $ | 3,852 | $ | 3,077 | 25 | ||||||||||||||||||||
| Retail Financial Services | 1,042 | (131 | ) | 15 | NM | NM | 911 | 489 | 86 | ||||||||||||||||||||||||||
| Card Services | 343 | (303 | ) | (672 | ) | NM | NM | 40 | (1,219 | ) | NM | ||||||||||||||||||||||||
| Commercial Banking | 693 | 390 | 368 | 78 | 88 | 1,083 | 706 | 53 | |||||||||||||||||||||||||||
| Treasury & Securities Services | 292 | 279 | 379 | 5 | (23 | ) | 571 | 687 | (17 | ) | |||||||||||||||||||||||||
| Asset Management | 391 | 392 | 352 | – | 11 | 783 | 576 | 36 | |||||||||||||||||||||||||||
| Corporate/Private Equity | 653 | 228 | 808 | 186 | (19 | ) | 881 | 546 | 61 | ||||||||||||||||||||||||||
| NET INCOME | $ | 4,795 | $ | 3,326 | $ | 2,721 | 44 | 76 | $ | 8,121 | $ | 4,862 | 67 | ||||||||||||||||||||||
| (a) | For further discussion of managed basis, see Note a. on page 13. | |
| (b) | The calculation of the second quarter 2009 earnings per share and net income applicable to common equity includes a one-time, noncash reduction of $1.1 billion, or $0.27 per share, resulting from repayment of Troubled Asset Relief Program (“TARP”) preferred capital. Excluding this reduction, the adjusted ROE and ROTCE for the second quarter 2009 would have been 6% and 10%, respectively. The Firm views the adjusted ROE and ROTCE, both non-GAAP financial measures, as meaningful because they enable the comparability to prior periods. | |
| (c) | Ratios are based upon annualized amounts. | |
| (d) | The Firm uses return on tangible common equity, a non-GAAP financial measure, to evaluate the Firm’s use of equity and to facilitate comparisons with competitors. For further discussion of ROTCE, see page 42 of the Earnings Release Financial Supplement. | |
| (e) | Tier 1 common capital ratio is Tier 1 common capital divided by risk-weighted assets. The Firm uses Tier 1 common capital along with the other capital measures to assess and monitor its capital position. For further discussion of Tier 1 common capital ratio, see page 42 of the Earnings Release Financial Supplement. | |
| (f) | Effective January 1, 2010, the Firm adopted new guidance that amended the accounting for the transfer of financial assets and the consolidation of variable interest entities (“VIEs”). Upon adoption of the new guidance, the Firm consolidated its Firm-sponsored credit card securitization trusts, Firm-administered multi-seller conduits and certain other consumer loan securitization entities, primarily mortgage-related, adding $87.7 billion and $92.2 billion of assets and liabilities, respectively, and decreasing stockholders’ equity and the Tier I capital ratio by $4.5 billion and 34 basis points, respectively. The reduction to stockholders’ equity was driven by the establishment of an allowance for loan losses of $7.5 billion (pretax) primarily related to receivables held in credit card securitization trusts that were consolidated at the adoption date. For further details regarding the Firm’s application and impact of the new accounting guidance, see Note 14 on pages 130-131, Note 15 on pages 131-142 and Note 22 on pages 149-152 of JPMorgan Chase’s March 31, 2010, Form 10-Q. | |
| (g) | Estimated. |
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