JPMorgan Chase Earns $1.21 Per Share

JPMorgan just released their earnings report. For the second quarter, the bank earned $1.21 per share. They said that the botched trade in London lost $5.8 billion including $4.4 billion during the second quarter. They said that the trader was misleading them so they’ll have to restate Q1 earnings. Their income for Q1 will be $459 million less than originally reported.

Here’s the earnings report:

JPMorgan Chase & Co. (NYSE: JPM) today reported second-quarter 2012 net income of $5.0 billion, compared with net income of $5.4 billion in the second quarter of 2011. Earnings per share were $1.21, compared with $1.27 in the second quarter of 2011. The Firm’s return on tangible common equity for the second quarter of 2012 was 15%, compared with 17% in the prior year.

Jamie Dimon, Chairman and Chief Executive Officer, commented on financial results: “Importantly, all of our client-driven businesses had solid performance. However, there were several significant items that affected the quarter’s results – some positively; some negatively. These included $4.4 billion of losses on CIO’s synthetic credit portfolio, $1.0 billion of securities gains in CIO and a $545 million gain on a Bear Stearns-related first-loss note, for which the Firm now expects full recovery. The Firm’s results also included $755 million of DVA gains, reflecting adjustments for the widening of the Firm’s credit spreads which, as we have consistently said, do not reflect the underlying operations of the Firm. The Firm also reduced loan loss reserves by $2.1 billion, mostly for the mortgage and credit card portfolios. These reductions in reserves are based on the same methodologies we have used in the past – the good news is that these reductions reflected meaningful improvements in delinquencies and estimated losses in these portfolios. We continue to maintain strong reserves.”

Dimon continued: “Since the end of the first quarter, we have significantly reduced the total synthetic credit risk in CIO – whether measured by notional amounts, stress testing or other statistical methods. The reduction in risk has brought the portfolio to a scale that allowed us to transfer substantially all remaining synthetic credit positions to the Investment Bank . The Investment Bank has the expertise, capacity, trading platforms and market franchise to effectively manage these positions and maximize economic value going forward. As a result of the transfer, the Investment Bank’s Value-at-Risk and Risk Weighted Assets will increase, but we believe they will come down over time. Importantly, we have put most of this problem behind us and we can now focus our full energy on what we do best – serving our clients and communities around the world.”

Commenting further on CIO, Dimon said: “CIO will no longer trade a synthetic credit portfolio and will focus on its core mandate of conservatively investing excess deposits to earn a fair return. CIO’s $323 billion available-for-sale portfolio had $7.9 billion of net unrealized gains at the end of the quarter. This portfolio has an average rating of AA+, has a current yield of approximately 2.6%, and is positioned to help to protect the Firm against rapidly rising interest rates. In addition to CIO, we have $175 billion in cash and deposits, primarily invested at central banks.”

“The Firm has been conducting an extensive review of what happened in CIO and we will be sharing our observations today. We have already completely overhauled CIO management and enhanced the governance standards within CIO. We believe these events to be isolated to CIO, but have taken the opportunity to apply lessons learned across the Firm. The Board of Directors is independently overseeing and guiding the Company’s review, including any additional corrective actions. While our review continues, it is important to note that no client was impacted.”

Commenting on the balance sheet, Dimon said: “Our fortress balance sheet remained strong, ending the second quarter with a strong Basel I Tier 1 common ratio of 10.3%. We estimate that our Basel III Tier 1 common ratio was approximately 7.9% at the end of the second quarter, after the effect of the final Basel 2.5 rules and the Federal Reserve’s recent Notice of Proposed Rulemaking.”

Dimon concluded: “Through the depth of the financial crisis and through recent events, we have never stopped fulfilling our mission: to serve clients – consumers and companies – and communities around the globe. During the first half of 2012, we provided $130 billion of credit to consumers. Over the same period we provided nearly $10 billion of credit to small businesses, the engine of growth for our economy, up 35% compared with the same period last year. For America’s largest companies, we raised or lent over $720 billion of capital in the first six months to help them build and expand around the world. Even in this difficult economy, we have added thousands of new employees across the country – over 62,000 since January 2008. In 2011, we founded the “100,000 Jobs Mission” – a partnership with 54 other companies to hire 100,000 U.S. veterans by the year 2020. We have hired more than 4,000 veterans since the beginning of 2011, in addition to the thousands of veterans who already worked at our Firm. I am proud of JPMorgan Chase and what all of our employees do every day to serve our clients and communities in a first-class way.”

Excluding all adjustments, the bank earned 67 cents per share last quarter.

Posted by on July 13th, 2012 at 7:05 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.

Tickers: