Earnings Preview: JPMorgan Chase & Co. (NYSE: JPM) Third Quarter 2010
Thursday, September 23, 2010 2:26 PM

JPMorgan Chase & Co. (NYSE: JPM), the second-largest US bank by assets, is scheduled to release third quarter earnings before the opening bell on Wednesday, October 13, 2010. Analysts, on average, expect the company to report earnings of 88 cents per share on revenue of $24.65 billion. In the year ago period, JPMorgan Chase reported earnings of 82 cents per share on revenue of $28.78 billion.

JPMorgan Chase & Co., a financial holding company, provides various financial services worldwide. It has emerged as one of the strongest U.S. banks from the worst financial crisis in decades, thanks to its "fortress balance sheet." Led by CEO Jamie Dimon, the financial services giant never posted a quarterly loss during the downturn.

In the preceding second quarter, the New York-based bank's net income was $4.8 billion or $1.09 a share, compared to $2.72 billion or 28 cents a share in the year-ago quarter. Total revenue dropped 2% to $25.1 billion from $27.71 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 70 cents per share on revenue of $25.59 billion. The company's second quarter results primarily benefited from smaller loan losses and lower credit costs.

Industry experts expect third quarter results to reflect lower trading revenue due to seasonal reductions in July and August.

The company's credit card charge-off increased to 8.18 percent of total balances in August, from 7.95 percent in July. However, it was still well below the January rate of 10.91 percent, when it peaked for the year. Also, the bank said that its delinquency rate dropped to 3.89% from 4.06% in August, from 4.06 percent in July. JPMorgan's delinquency rate has dropped every month this year. The company anticipates Chase card service losses of around plus or minus 8% in third quarter compared to 9.02% in the prior quarter. JPMorgan expects charge-offs to fall farther in the fourth quarter.

According to media reports, JPMorgan Chase is planning to close the commodity unit that trades with the bank's own money, to comply with new US financial services rules banning proprietary trading. However, the financial services firm recently said that it intends to keep its big hedge fund unit Highbridge Capital Management in its current form because new financial regulations don't affect the bank's ownership of the business. According to JP. Morgan Chase & Co. Chairman and Chief Executive James Dimon, derivative regulation in the Dodd- Frank financial overhaul act will cost the bank about $1 billion in lost revenue. As far as CARD Act is concerned, JPMorgan expects total net income impact of plus or minus $750 million. However, Dimon told investors at the Barclays financial services conference in New York that his bank "will be fine" even after implementing stricter capital and liquidity requirements from the Basel Committee on Banking Supervision. Dimon also reiterated that the bank intends to restore its dividend payout ratio to about 30-40% of normalized earnings. He said that a dividend increase may be possible in early 2011.

Among other developments, JPMorgan acquired a $3.5 billion portfolio of multifamily and commercial real estate loans from Citibank.

In terms of stock performance, JPMorgan shares are down nearly 4 percent since the beginning of the year.

Disclosure: Author doesn't own any of the stocks discussed here.



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