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After a Careful Review of JP Morgan’s Earnings Release, I Must Ask – “What the Hell Are Those Boys Over at JP Morgan Thinking????”
JPM is leaving no stone unturned in propping up its operational
performance and giving out green signals, even if it involves the most
unsustainable measures. While in 1Q10, trading income came to the rescue
of the sagging core operations, in 2Q10, it was management’s
over-exuberance (defying logic and rationality, to some extent)
resulting in drastic reduction in loan loss provisioning and beefing up
the bottom line. Although the credit quality has shown slight
improvement (thanks to the enormous fiscal and monetary stimulus), it
does not completely warrant for JPM’ unhealthy and hasty decision to
substantially pare its loss provisions. I know many financial pundits
second guess management as arm chair coaches, but when management error
is egregious, well let’s let the numbers speak through graphics….
As Excerpted from As
I Made Very Clear In March, US Housing Has a Way to Fall:
Trust me, the collateral behind many more mortgages will continue to
depreciate materially as government giveaways and bubble blowing for
housing fade!
The delinquency and NPA levels drifted down a bit, but they are still
at very high levels. Charge-offs came down but the reduction in
provisions has been quite disproportionate bringing down the allowance
for loan losses. In 2Q10, the gross charge- offs declined 26.6% (q-o-q)
to $6.2 billion (annualized charge off rate – 3.55%) from $8.4 billion
in 1Q10 (annualized charge off rate – 4.74%). But the provisions for
loan losses were slashed down 51.7% (q-o-q) to $3.4 billion (annualized
rate – 1.9%) against $7.0 billion (annualized rate – 3.9%) in 1Q10.
Consequently, the allowance for loan losses declined 6.2% (q-o-q) from
$35.8 billion from $38.2 billion in 1Q10. Non performing loans and NPAs
declined 5.1% (q-o-q) and 4.5% (q-o-q) respectively. Thus, the NPLs and
NPAs as % of allowance for loan losses expanded to 45.1% and 50.7%,
respectively from 44.6% and 49.8% in 1Q10. Delinquency rates, although
moderated a bit, are still at high levels. Credit card – 30+ day
delinquency rate was 4.96% and the real estate – 30+ day delinquency
rate was 6.88%. The 30+ days delinquency rate for WaMu’s credit impaired
portfolio was 27.91%.
While the lower provisioning was able to beef up the bottom
line in this quarter, the same is not sustainable in the future as JPM
cannot afford to reduce its allowance for loan losses substantially.
This is a one shot, blow your wad and go to sleep deal! There is no
margin for error in the future, and one can only assume that the reason
this was done was to pad accounting earnings and to take advantage of
the extremely short term, and obviously naïve, memory of the financial
media and retail/institutional investor. Given the high charge-off rates
and delinquency levels, the provisioning will probably need to be
bolstered again in the not too distant future.
Listen, even US Economic Cheerleader and Propaganda-in-Chief
Ben Bernanke said it will be several years before growth and employment
resumes. Sooooo…. What the hell are the boys (and girls) at JP Morgan
doing????
The reduced provisioning can help improve bottom line, but it
cannot conceal the weakness in core operations as reflected in the
sagging revenues especially in the investment banking segment.
Total net revenues declined 9.3% (q-o-q) and 2.0% (y-o-y) with non
interest revenues declining 11.1% (q-o-q) and 4.2% (y-o-y) and net
interest income declining 7.5% (q-o-q) and remaining flat on y-o-y
basis. Trading revenues which witnessed a huge surge and underpinned the
revenue growth in 1Q0 was seen moderating in 2Q10 in lieu of the high
volatility recorded in the capital markets recently. Revenues from
principal transactions declined 54.0% (q-o-q) and 32.5% (y-o-y) to $2.0
billion. Investment banking fees were down 2.7% (q-o-q) and
32.5%(y-o-y) to $1.4 billion with most of the weakness coming from
Europe (If you are wondering why, reference our Pan-European
Sovereign Debt Crisis series). Lending & deposit-related fees
declined 3.6% (q-o-q) and 10.2% (y-o-y) largely driven by declining
deposit fees. Only non interest income that was seen growing was
mortgage and credit card fees due to improved volumes and
activity in these segments and even this revenue stream may come under
attach under new legislation.
The rest of this Q2 review can be downloaded by subscribers
(click here to subscribe) here: 
JPM 2Q10 review
Subscribers should also review our forensic valuation reports, which
have (thus far) proven to be right on the money in terms of JP Morgan:
The
JP Morgan Professional Level Forensic Report (subscription
only)
The JP Morgan Retail Level Forensic Report (subscription only)
Those that don’t subscribe still have a lot of BoomBustBlog JPM
opinion and analysis to chew on, including a free, condensed (but still
about 15 pages) version of the forensic analysis above. You can find it
below this pretty graphic from “An
Unbiased Review of JP Morgan’s Q1 2010 Results Yields Less Roses Than
the Maintream Media Presents“…
An
Independent Look into JP Morgan (subscription content free
preview!)
If
a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to
Hear It?: Pt 2 – JP Morgan
Is
JP Morgan Taking Realistic Marks On Its WaMu Portfolio Purchase?
Doubtful!
Anecdotal
observations from the JP Morgan Q2-09 conference call
- advertisements -
What happens to JPMs or any other bank that tanks shares of the fed (assuming they would ever let a TBTF bank tank)? Did Lehman (being an investment bank) have fed shares? If not, did Goldman not have fed shares, but do now because of their designation changeover? Do the amount of fed shares an institution has relate to how much government support it gets? Is there any where on their public filings that they put a value on their fed share holdings? Are we there yet? Naive questions I know but WTF.
The DOW/SP00 leg down has started.
http://stockmarket618.wordpress.com
The banks are just... unbelievable.
Imagine that you could
- borrow all the free money you wanted,
- leverage to whatever extent you wanted (knowing that someone else would take all the losses while you kept all the gains),
- be handed a 100% winning trade in the form of a steep yield curve for over a year,
- have accounting rules suspended so you can fake your books,
- have all the regulatory agencies look away while you collude with your compatriots to send the market wherever you wish,
- own congressmen and cabinet members who keep Fannie/Freddie buying the shittiest assets you care to unload,
- have the FDIC backstopping your bonds so you can issue debt at whatever coupon you wish
- have the Federal Reserve create trillions of dollars solely for the purpose of propping the assets on your books
In short, have every advantage the universe has to offer short of godlike powers, yet still have trouble making money. No stupid person could screw up this badly; it is the work of pure malevolent genius.
Their demise should be considered evolution in action.
...and this is what we know. Imagine what we don't know about JPM as well as other players? Boggles the mind.
Actually, You dont have to read all those articles. All you need in order to know everything about moronizm within JPM - is to read customers' and emploees' reviews from the site http://www.chase-sucks.com ... or ... to have an account with JPM. I am lucky - they (JPM) closed my account for no reason and without any explanation 9 years ago, with all my money refund,- after 5-6 years of being their customer. (Dont get me wrong - I am a banking pro, used to work in various banks for many years, I can forgive my bank many wrong things).
(1) Trading result is supposed to be volatile. What is amazing is that the big banks are so dependent on it.
(2) The reserve is supposed to be used whether it is to make up the loss or to make an accounting gain. What is interesting is that earnings do not have to be earned. Big banks can always find something to inflate earnings. If they cannot, then the Fed is always there to bail them out.
Those JPM "boys" are thinking exactly what Bear and Lehman boys (insiders such as Cioffi, Tannin, etc) were thinking in the summer of 2007 (market near the peak) when they sold tens of billions worth of stock back to Bear and Lehman at $160 and $90 respectevely. (Remember those stock buybacks?)
So the thinking was and still is "Ok,*it's* about to hit the fan. Time to cash out. This may be our last bonus for a while anyway... How can we make it as large as possible? And then? Then let's hope for TARP 2.0!"
" What the hell are they thinking ???? " They are thinking , ' how the hell can we steal more from the U.S. TREASURY ' !!! ......... that's what those criminals are thinking !!!
..whathappens if they decide to double-down?
“An Unbiased Review of JP Morgan’s Q1 2010 Results Yields Less Roses Than the Maintream Media Presents“…
Re the typo ("maintream" for "mainstream" in your free link (thanks; informative): I propose a neologism:
"Mainteam". It's the mainteam media! Go team!
JPM thinks they are invulnerable and that the U.S. printing press will bail them out when this portfolio of promises shits the bed.
It is plain to see they are thumbing their collective noses at the American People, and juggling their books to take down some fat bonuses. When this house of cards falls down, it will take the entire system with it. As counterparties to those derivatives get wiped out in the cataclysm, and cannot pay off, JPM will run to Uncle Sugar beging for money
JPM=NYFED
Anacona, you are right. Uncle Sam bailed their sorry asses out earlier. Why should we expect a difference? Until they day Uncle Sam does takes away the sugar coated tit, boom it is all over. Unfortunately, JPM's upper management will get wealthier and everyone else the bag. God bless crony capitalism and our soon to be 3rd world nation.
It kind of reminds me of gentlemen on the Titanic as it was sinking. We have the unsinkable ship from my superior society. We will pretend nothing is wrong after the gaping hole was ripped in the ship's side. Water filling up 40% of the vessel. Time to go down with your ship JPM and your foolish honor.
Really? That's your take on this? That a) JPMs would go down with their ship, rather than fleeing like rats? And b) that JPMs have 'honor'?
Ha ha. You sly wag. That's pretty funny.