JPMorgan Chase says it earned $2.4 billion, or 40 cents a share beating the analysts estimates of 30 cents a share for its first quarter 2009 results. That's from $2.4 billion, or 67 cents per share, a year ago, but exceeding market expectations. Revenue increased 48% to $25.03 billion.
Jamie Dimon, Chairman and Chief Executive Officer, commented, “The firm earned more than $2 billion this quarter, despite extremely high credit costs of $10 billion (including $4 billion added to reserves), largely in Card Services and Retail Financial Services.
Importantly, we generated record firmwide revenue; record revenue and net income in the Investment Bank; and benefited from underlying growth in Retail Banking, including increased deposits and checking accounts, higher mortgage refinancing volumes and excellent progress on the Washington Mutual integration. We also continued to see solid volumes and earnings across Commercial Banking, Treasury & Securities Services and Asset Management.”
Looking ahead to the rest of 2009, Dimon concluded: “It is reasonable to expect additional increases to credit reserves if the economic environment worsens. Yet, we are confident that even a highly adverse economic scenario would not compromise our overall strength and stability – or our ability to enhance our franchises.
While the bank has largely avoided the losses and writedowns on complex debt securities and subprime mortgages that hurt other banks in 2008, it is heavily exposed to consumer credit. Dimon warned on Thursday that any further economic weakening could force it to set aside even more money later in the year.
Revenue from the bank's retail division was boosted by its acquisition of failed Seattle, Washington-based thrift Washington Mutual Inc last fall, as well as higher mortgage fees and a pickup in refinancing. But this unit also set aside more money against credit losses.
Profit from investment banking rose as well, helped by debt underwriting and stronger trading results in credit and emerging markets.
Dimon said it is "unreasonable" to expect investment banking results to remain as strong as they were in the first quarter.
Net income to JPMorgan common shareholders was $1.52 billion, or 40 cents a share, down from $2.29 billion, or 67 cents a share, a year earlier. Net income before preferred dividends was $2.14 billion, compared with $2.37 billion a year ago. Revenue increased 45 percent to $25 billion.
Analysts on average expected the second-largest U.S. bank to earn 30 cents a share, with forecasts ranging from 11 cents to 45 cents, according to Reuters Estimates. The bank set aside $10 billion for credit losses, almost twice the amount of a year earlier.
JPMorgan's trading risk, including its loan hedging portfolio, rose from both a year earlier and the 2008 fourth quarter.
Value at risk, a measure of the maximum common loss on 99 percent of trading days during the quarter, was $336 million in the first quarter, compared with $122 million a year earlier and $327 million in the fourth quarter.
The company reported investment banking profit of $1.6 billion, up from a loss of $87 million a year earlier, on an increase in debt underwriting and strong credit, emerging markets and rates trading activity.
Goldman Sachs also boosted its trading risk in the first quarter, mainly in interest-rate products like government bonds.
The increase in value at risk does not necessarily mean the banks are making bets with their own money, and may reflect the increased risk associated with holding securities in inventory for trading with customers. JPMorgan's investment banking risk has gone down, not up, Dimon said on a call with journalists.
He also said JPMorgan could raise capital if it wanted to, adding that he does not believe any bank should be allowed to repay the government before it does.
Goldman Sachs said it would repay the government only when regulators gave it the green light.
Dimon said it has become a "scarlet letter" for banks to keep money received under the Troubled Asset Relief Program. JPMorgan's ratio of tangible common equity to tangible assets, an increasingly popular measure of capital strength, was about 4.3 percent in the first quarter. That is high compared to weaker competitors, some of whom have tangible common equity ratios below 3 percent. The market is not clear about what level is ideal for this ratio, and some analysts argue banks should have ratios closer to 5 percent.
In February, JPMorgan slashed its common stock dividend 87 percent to 5 cents a share, saving $5 billion of common equity a year.
JPMorgan shares have outperformed the broader sector so far this year, rising about 3 percent through Wednesday, compared with a 20 percent decline in the KBW Bank Index.