Archive - Apr 12, 2013 - Story

If JPM and its "fortress" balance sheet and business model are supposed to represent Q1 earnings for US banks, it will not be a good start to the year. While EPS beat expectations solidly, coming at $1.59 on expectations of $1.39 print, this was largly driven by a bigger than expected loan loss reserve release in its real estate portfolios ($650MM pretax), and card services ($500MM pretax), which was the largest combined release number since the $2 billion reduction in Q1 2012. This took down total JPM total loan loss reserves to $20.8 billion, down from $21.9 billion in Q4, and down $5.1 billion from the $25.9 billion a year ago. This happened even though JPM's NPL declined far more modestly, from $10.7 billion to just $10.4 billion. It was the revenue of $25.12 that missed expectations of $25.85, down from $26.05 billion a year ago, and which is the bigger issue for the bank, driven by disappointing trading results with fixed income markets revenue of $4.8 Billion, down 5% YoY, equity markets revenue of $1.3 Billion, down 6% YoY, and Securities Services revenue of $974mm, flat YoY. Not surprisingly in order to maintain expenses, headcount continue to decline from 258,753 to 255,898.

There was little in terms of overnight newsflow to spook algos, but the tone is decidedly sour this morning following a lack of either the now traditional Japan or Europen-open buying ramps. The primary reason for this may well be the ongoing decline in the USDJPY which failed to breach the 100 barrier yesterday, coming as close as 99.95 before the Mrs. Watanabe onslaught had to be called off despite some more jawboning from Kuroda whose headlines are now summarily ignored, and which appears to have set a line in the sand for Japan, whose market naturally closed lower following this strengthening in its currency. Similarly troubling was the dip in the SHCOMP which closed down -0.58%, this despite the epic M2 and credit injection reported yesterday: if new liquidity can't send the market higher, what can?