By Elizabeth Hester
Oct. 14 (Bloomberg) -- JPMorgan Chase & Co., the second- largest U.S. bank by assets, said third-quarter profit rose almost sevenfold, beating analysts’ estimates as fixed-income revenue surged.
Earnings climbed to $3.59 billion, or 82 cents a share, from $527 million, or 9 cents, in the same period a year earlier at the height of the financial crisis, the New York-based company said today in a statement. Twenty analysts surveyed by Bloomberg estimated earnings of 51 cents a share.
Chief Executive Officer Jamie Dimon, who repaid the firm’s
$25 billion of government rescue funds in June, is capitalizing on his 2008 acquisitions of Bear Stearns Cos. and Washington Mutual’s banking business. Investment-banking revenue from fixed-income jumped to a record $5 billion, compared with markdowns of $3.6 billion a year earlier.
"What you have is this tremendous pent-up demand for funding, which burst open in the quarter," Richard Bove, an analyst at Rochdale Securities Inc. in Lutz, Florida, said in a Bloomberg Radio interview.
The investment-banking unit generated $1.92 billion in profit during the quarter, or more than half the bank’s total.
The company is the world’s biggest underwriter of stock and equity-linked securities as well as U.S. debt, according to data compiled by Bloomberg.
JPMorgan rose to $47.47 at 8:10 a.m. from $45.66 at the close on the New York Stock Exchange yesterday.
Credit Reserve
The bank added $2 billion to its consumer credit reserves, bringing the companywide total to $31.5 billion, or 5.3 percent of loans. Credit Suisse Group AG analyst Moshe Orenbuch estimated the bank would add $1.4 billion to the reserve.
"Credit costs remain high and are expected to stay elevated for the foreseeable future," Dimon said in the statement. "While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue."
The bank may add less to loan-loss reserves in coming quarters depending on the health of the economy, Chief Financial Officer Michael Cavanagh said on a conference call with reporters.
The bank’s credit-card and consumer businesses have stalled as the U.S. economy emerges from the worst recession since the 1930s. The unemployment rate rose to 9.8 percent in September, the highest level since 1983, and economists predict a rebound in consumer spending will wane as joblessness surpasses 10 percent.
Retail Banking
The retail bank posted net income $7 million, a decline of $57 million from a year earlier, as the bank set aside more money to cover credit losses. Home-equity charge-offs climbed to $1.14 billion from $663 million and are expected to reach about $1.4 billion "over the next several quarters," the bank said in slides posted on its Web site. Prime mortgage losses rose to $525 million from $177 million.
Credit cards, a division Dimon has said is unlikely to make money this year or next, lost $700 million, compared with income of $292 million in the third-quarter last year. The net charge- off rate, excluding some bad loans acquired in the WaMu takeover, climbed to 9.41 percent, from 8.97 percent in the second quarter and 5 percent in the year-earlier period.
"The capital markets portion of the industry was very strong in the quarter, while there are continued problems in the traditional banking part of the company," Bove said.
Tier 1
The Tier 1 capital ratio, a gauge regulators use to measure financial strength, climbed to 10.2 percent from 9.7 percent in the second quarter.
Income in the commercial-banking unit climbed 9 percent to
$341 million as WaMu added to revenue. JPMorgan said it set aside $355 million to cover credit losses, compared with $126 million in the previous year.
The asset-management unit boosted profit 23 percent to $430 million, while treasury and securities services posted net income of $302 million, 26 percent less than the previous year.
JPMorgan is the first of the largest U.S. banks to report earnings. Goldman Sachs Group Inc., also based in New York, may say tomorrow that profit almost tripled to $2.4 billion, according to analysts’ estimates. New York-based Citigroup Inc., which also reports tomorrow, is expected to post a $2.55 billion loss that would mark its sixth unprofitable quarter in the past eight.
Bank of America Corp., JPMorgan’s bigger competitor, may post a loss of $212.2 million on Oct. 16 as the Charlotte, North Carolina-based company continues to integrate its Merrill Lynch & Co. acquisition, according to the Bloomberg survey.
Tue May 03, 2016 9:51 am by Andrea ForexMart
Subject: JPMorgan Profit Surpasses Estimates on Fixed Income (Update2) 
