Bloomberg: JPMorgan May Show Record Profit

JPMorgan Chase ($JPM) will release its Q4 earnings tomorrow. Wall Street expects the bank to report earnings of 91 cents per share. This would be the first earnings drop since Q2 of 2009.

Here’s an outlook from Bloomberg:

JPMorgan, the biggest U.S. bank by assets, will probably report a 23 percent slump in fourth-quarter adjusted profit from the same period in 2010 to $3.74 billion, or 90 cents a share, according to the survey. Analysts lowered their estimates after Chief Executive Officer Jamie Dimon, 55, said at a Dec. 7 investor conference that trading would be “essentially flat” from the third quarter.

Banking Units

Revenue at the company’s investment-banking unit slid this year from $8.2 billion in the first quarter to about $4.5 billion in the third after backing out a $1.9 billion one-time accounting gain as concern mounted that Greece would default and U.S. lawmakers would fail to raise the debt ceiling. JPMorgan told investors in October that the division would face similar market conditions for the rest of the year.

Trading results got a lift in the third quarter as the price of bank debt fell, resulting in a so-called debt-valuation adjustment that boosted profits for JPMorgan, Goldman Sachs and Citigroup. The accounting adjustment probably hurt banks in the fourth quarter as price of their debt rose, resulting in the opposite effect on earnings.

“Trading and investment-banking revenue has been weak and volatile, especially over the last two quarters, but really the last two years,” Najarian said. Investment-banking results will be worse for the fourth quarter than in the third quarter, he said.

Revenue Declines

Overall revenue at JPMorgan is expected to drop 13 percent for the quarter and 4 percent for the year, to $98.9 billion. Fixed-income trading revenue at U.S. banks may fall 12 percent from the third quarter, minus accounting adjustments, while equities revenue drop 10 percent and investment-bank revenue remains unchanged, David Trone, an analyst at JMP Securities, wrote in a Dec. 16 report.

Markets showed little improvement in the fourth quarter, as trading remained subdued, corporate and institutional clients stayed out of the markets and the holidays slowed deal and trading traffic.

Lenders will continue to face pressure from persistently low interest rates, which have compressed profit margins on lending. They’ll also have to contend with new restrictions on fees.

The so-called Durbin amendment, which limits what lenders can charge merchants on debit transactions, took effect on Oct. 1, affecting almost all U.S. banks and costing the top 25 about $1.5 billion, according to Jason Goldberg, a senior bank analyst at Barclays Capital in New York.

Posted by on January 12th, 2012 at 10:14 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.