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JPM Reports $1.28 EPS On $1.15 Consensus... However $0.29 Is From Reduced Credit Card Loan Loss Reserves

Tyler Durden's picture





 

And so the loan loss reserve accounting game continues. JPM just reported earnings of a solid $1.28/share for Q1 2011, generated by net revenue of $25.8 billion (a decreased of $2.4 billion from a year ago). This would have been enough to push the stock substantially higher... if only $0.29 of this "beat" was not from a purely accounting benefit from reduced credit card loan loss reserves. Now the only question is how much of this credit card improvement is from credit card holders paying their credit card cards instead of their mortgage (and with a $50 billion annual squatters rent benefit this is not a trivial question). Considering that JPM announced a $650 million expense for estimated costs of foreclosure-related matters our guess is "a lot." Per Jamie Dimon: " "Retail Financial Services demonstrated good underlying
performance, while we continued to invest in building branches and
adding to our sales force. However, this performance was more than
offset by the extraordinarily high losses we still are bearing on
mortgage-related issues.(a) Unfortunately, these losses will
continue for a while. Rest assured, we are fully engaged in fixing our
problems and addressing our mistakes from the past, and we will strive
to build the best mortgage business going forward.""

More from the release:

  • Investment Bank reported strong earnings; solid results from other businesses
  • Retail Financial Services demonstrated good underlying performance; results offset by elevated credit costs and other mortgage-related costs
  • Fortress balance sheet strengthened: Basel I Tier 1 Common1 of $120 billion, or 10.0%; estimated Basel III Tier 1 Common1 of 7.3%; credit reserves at $30.4 billion, coverage ratio at 4.10% of total loans1
  • Increased quarterly common stock dividend to $0.25 per share; authorized new $15 billion multi-year common stock repurchase program, of which up to $8.0 billion of common stock repurchases is approved for 2011
  • First-quarter results included the following significant items:
    • $2.0 billion pretax ($0.29 per share after-tax) benefit from reduced credit card loan loss reserves
    • $1.1 billion pretax ($0.16 per share after-tax) loss from mortgage servicing rights asset adjustment for increased costs
    • $650 million pretax ($0.10 per share after-tax) expense for estimated costs of foreclosure-related matters
  • Over $450 billion in new and renewed credit provided to and capital raised for consumers, corporations, small businesses, municipalities and not-for-profits in the first quarter of 2011
  • Enhanced programs to help military and veteran customers, including a commitment to reduce mortgage pricing and increase mortgage loan modifications, jobs, training, and homeownership assistance
  • Loan modifications of 1,098,000 offered and 324,000 completed since the beginning of 2009
  • Added 16,300 employees over the last twelve months, including more than 9,800 in the U.S.

Full release here

JPM has decided that the total allowance for credit losses can be allowed to decline from $3.1 billion to $1.8 billion in one year: a 43% decline!

And some trading data: JPM reported a 83 VaR for Q1, higher from both Q4 and Q1 2010.

Earnings presentation which has little discussion of key items associated with loan loss provisioning and write-offs:

1Q11_Earnings_Presentation_FINAL

 


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Wed, 04/13/2011 - 07:18 | Link to Comment ak_khanna
ak_khanna's picture

The market operators ie banksters earn their revenues nowadays by driving the USD index down and pumping up everything else. This process will continue till there are no long positions left in the USD index and no short positions in any of the commoditie­­s, stock or currencies other than the USD.

The operators are then likely to take the long position on the dollar and short position on everything else. They would then use their money power to move the markets in the direction which would get them the maximum profit while screwing all other traders / hedge funds / investors.

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves­­. They effectivel­­y use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls

OR

When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.

http://www­.marketora­cle.co.uk/­Article245­81.html

Wed, 04/13/2011 - 07:48 | Link to Comment Twindrives
Twindrives's picture

Hell has a special place 'reserved' for filth like Jamie Dimon.  

Wed, 04/13/2011 - 07:56 | Link to Comment Sam Clemons
Sam Clemons's picture

Easy to make money when you can just steal from everyone else.

I had a JPM checking account up until yesterday.  Yeah, I know...I signed up when they were doing those $150 deals.  They recently changed the terms and conditions.  I foolishly never read those things, but the gist of the change was if you didn't deposit $500/mo or use your debit card five times a month, they charge you $6.

I was charged $6 on 15 March, and tried to get the money back, but failed.  I wonder how many other people they took $6 from in order to boost their earnings.  Assuming maybe 10% of Americans have a Chase account, they just got away with $180M without doing a thing (assuming the other people didn't read the T&C either).

Wed, 04/13/2011 - 08:06 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

6 is cheap. Other banks are doing 8 or 10 or more for holding your money. Why bother when e fed gives it so freely.

Of course they upped all fees and ATM fees because they can.

Jpm has 15 B for stock buybacks to keep those eps numbers beating but no new loans or anything productive.

Wed, 04/13/2011 - 13:47 | Link to Comment Chappy
Chappy's picture

Seriously?  They give you no interst on the account then charge you to hold your money.  These are sad times.

Wed, 04/13/2011 - 07:24 | Link to Comment unwashedmass
unwashedmass's picture

doncha all wonder where Jamie and the gang buried the losses in silver? gotta be a big, big elephant sittin' in the middle of some little dark room there at JPM....

Wed, 04/13/2011 - 07:50 | Link to Comment hubbywan
hubbywan's picture

Not a word of their major short silver positions, and the profits or losses they've incurred with them. What's up?

Wed, 04/13/2011 - 07:33 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Looks like a miss to me.

Oh yeah the dollar under 75 great...

Wed, 04/13/2011 - 07:38 | Link to Comment unwashedmass
unwashedmass's picture

yeah, but look at JPM sit on that gold and silver this morning.

i'm betting that when the buck hits .70, with the good lord and the CTFC willing, JPM will have silver back to 33....gold 1300......

of course, those prices will only be for US citizens, aka the peasantry......around the rest of the world where the media is not so tightly controlled and the market not so manipulated, gold will be over 2000...

you gotta love the CTFC, the porn must be fabulous there.

Wed, 04/13/2011 - 10:40 | Link to Comment Thomas
Thomas's picture

Amazingly, CNBC picked up on that $0.29 loan loss reserve scam. I was shocked. Usually they just call everything bad "items" and move along.

Wed, 04/13/2011 - 07:37 | Link to Comment anynonmous
anynonmous's picture
The Most Dangerous Man in America: Jamie Dimon

http://baselinescenario.com/2010/04/03/the-most-dangerous-man-in-america...

Wed, 04/13/2011 - 07:49 | Link to Comment Dick Darlington
Dick Darlington's picture

How much was the "consensus" dragged down this time to make the result look like a beat?

Wed, 04/13/2011 - 07:47 | Link to Comment bullionbaron
bullionbaron's picture

Where are all the losses from their Silver shorts? Weren't they supposed to be losing billions after Silver broke through $36?? lol

Wed, 04/13/2011 - 07:53 | Link to Comment unwashedmass
unwashedmass's picture

who was it who went thru their annual report the other day and couldn't find the word silver anywhere.....

i mean, the guy -- dimon -- is essentially running things. if he wants to hide losses, who is going to confront him? The Fed? The SEC? The CTFC? right.

that report .... it says whatever Dimon wants it to say, any connection to reality is inadvertant.....

Wed, 04/13/2011 - 07:51 | Link to Comment A Man without Q...
A Man without Qualities's picture

Interesting JP Morgan story in the NY Times.  JPM was the swap counterparty for an SIV called Sigma, and essentially was able to seize assets in the vehicle at fire sale prices, resulting in large losses for investors, that included JPM Asset Management clients.  As the assets recovered in value, this led to large gains to them when they sold after the Fed had come in and backstopped the whole market.  It makes it seem like a grand scheme to fleece investors, but I think it is just management acting in a very aggressive manner, and therefore did not think about the broader implications.  

 

http://www.nytimes.com/2011/04/11/business/economy/11bank.html#

Wed, 04/13/2011 - 07:53 | Link to Comment oogs66
oogs66's picture

Fade the mini rally.  Market won't be able to hold the post JPM pop.  1)  JPM is in best position of all banks, so fear that other banks won't be so good will hit.  2)  European sovereign credit still heavy, it will rear its head again in spite of European stocks ignoring it.  3)  More data coming, and laterly its not been good

 

Wed, 04/13/2011 - 07:55 | Link to Comment unwashedmass
unwashedmass's picture

you're right there, anyone else catch the mortgage stats this morning? Big O whispers about the mortgage deduction today and the housing market is toast.

Wed, 04/13/2011 - 08:55 | Link to Comment SheepDog-One
SheepDog-One's picture

He's rumored to be mentioning something about raising taxes and lessening benefits. Should be an interesting day indeed.

Wed, 04/13/2011 - 07:55 | Link to Comment unwashedmass
unwashedmass's picture

you're right there, anyone else catch the mortgage stats this morning? Big O whispers about the mortgage deduction today and the housing market is toast.

Wed, 04/13/2011 - 08:05 | Link to Comment A Man without Q...
A Man without Qualities's picture

The "sell in May go away" line is in reality "sell on JPM Q1 earnings and go away".  Look at some historical charts - it's surprising how often it marks a near term top...

Wed, 04/13/2011 - 08:14 | Link to Comment cowdiddly
cowdiddly's picture

In other words America, since we have gathered all the wealth and now can now control Washington, your tax dollars will now need to be wire transfered quarterly directly to JPM or our subsidiary GS (Unless of course you are a C corp, even though its considered a person, will be excused). We now can pay you what ever wage we feel like and its probably not going to be enough to afford to save for a down payment. Since you will no longer have to worry about those pesky mortgage payments, We can now offer to tattoo the bar code of a new CREDIT CARD directly on your forehead, to buy anything you wish at our company store for a mere 29.99% (Subject to change at our discretion). You can use said card to buy ammo to defend our interests, as long as the projectiles contain less than 40% silver, when other nations, who have been running circles around us for the last ten years decide to exert their influence and land invasionary forces near our beloved Hamptons. 

    This is a forward looking statement, actual returns will vary.

Wed, 04/13/2011 - 08:02 | Link to Comment Cdad
Cdad's picture

Jamie no cred Dimon puts forth yet another fraudulent qtr report...3rd in a row, in fact.  Try as the Street may have, they just could not keep up with the loan loss reserve take down this time...and I suspect that will actually turn the stock down by the close.  At $.29...twice the Street guess on J. Dimon shenanigans, this was truly a miss on the qtr.  The stock goes out today below $46...my guess.

And per their own words, the mortgage mess continuing indefinitely, this matches perfectly with lessening loss provisions[?]  Good grief.

OK...when does J. Dimon make his press release...about spending more time with the fam?  He has to go.  I cannot imagine anyone [save for Cramer and K. Finerman, of course] who will believe this guy anymore.  The board at JPM is chewing through old Jamie's cred pretty fast.

Here we all stand, in the midst of the wasteland that Ben Bernanke, J. Dimon, and the criminal syndicate known as Wall Street have made.  Fun!

[Oh, and Becky...ouch.  Your desperation this morning to move this fraudulent news...heartbreaking!  Another BlowHorn personality tosses her cred on the funeral pyre of the 4th estate]

Wed, 04/13/2011 - 08:53 | Link to Comment SheepDog-One
SheepDog-One's picture

I guess at this point Quick and the rest figure they may as well go for the Full Monty, after youve completely sold out long ago, may as well keep running with it.

Wed, 04/13/2011 - 08:21 | Link to Comment plocequ1
plocequ1's picture

Who cares about the Balance sheet. This is what the world sees. Plus they have good coffee and Donuts at their  local branches. My branch gets theirs from Panera Breads . Rally on

http://www.bloomberg.com/news/2011-04-13/jpmorgan-chase-profit-surges-67...

Wed, 04/13/2011 - 08:52 | Link to Comment SheepDog-One
SheepDog-One's picture

Hey as long as they can count on dumbasses with pockets stuffed full of money to believe the hype and buy the top, its all good!

Wed, 04/13/2011 - 08:12 | Link to Comment trav7777
trav7777's picture

I wonder how much of that bottom line was from blowtorching goldbugz lol

But seriously, Tyler what is the problem with reducing loan loss reserves?  To actually expect to take losses with this Fed operating is foolish.  Loan loss reserves should be cut completely to zero.  You can always flip the CLOs to shell companies stood up by the wives of your wall street cronies.

Wed, 04/13/2011 - 08:48 | Link to Comment SheepDog-One
SheepDog-One's picture

'Blowtorching gold'? Its at $1,460 right now, what got blowtorched?

Wed, 04/13/2011 - 08:16 | Link to Comment oogs66
oogs66's picture

Big earnings in fixed income. How much POMO related?

 

Wed, 04/13/2011 - 09:31 | Link to Comment Hansel
Hansel's picture

33% increase in debt underwriting fees.  Is that POMO related?

Wed, 04/13/2011 - 08:19 | Link to Comment writingsonthewall
writingsonthewall's picture

"JPM has decided that the total allowance for credit losses can be allowed to decline from $3.1 billion to $1.8 billion in one year: a 43% decline!"

They must think it's all over - the arses. Don't tell them that more businesses are in trouble than in 2007 and that the over-bullish market is a sure sign of impending collapse.

 

ANYONE WHO HAS A JPM OWNED CARD - DEFAULT NOW!

DEFAULT NOW - CRASH JPM

DEFAULT NOW - CRASH JPM

DEFAULT NOW - CRASH JPM

DEFAULT NOW - CRASH JPM

Wed, 04/13/2011 - 08:24 | Link to Comment unwashedmass
unwashedmass's picture

they know its not over, they don't care. they know-- basically cause they own him --- Bennie Boy will just print up more cash when we crash again.......

i mean, who cares? they won't have to pay it back, the peasants will.....

so its not like it matters.

Wed, 04/13/2011 - 08:22 | Link to Comment unwashedmass
unwashedmass's picture

they know its not over, they don't care. they know-- basically cause they own him --- Bennie Boy will just print up more cash when we crash again.......

i mean, who cares? they won't have to pay it back, the peasants will.....

so its not like it matters.

Wed, 04/13/2011 - 08:23 | Link to Comment topcallingtroll
topcallingtroll's picture

And the colored girls sing...
Du du du....du de du
Du tadu tadu...du de du

Wed, 04/13/2011 - 09:27 | Link to Comment trav7777
trav7777's picture

of course it's over...all losses will be passed off to the Fed via loans to the shell companies stood up by wives of wall street cronies

Wed, 04/13/2011 - 08:21 | Link to Comment writingsonthewall
writingsonthewall's picture

Don't forget Dimon is one of the few bankers who have experienced crises before. He was in the Fed room when they decided to bailout LTCM - on that occassion the banks had to do it themselves - now they learnt from that 'mistake' and they get the Government to do it now.

 

Who will bail out the Government the next time it happens? You can see there is a spiral here as each set of 'bailouters' is simply not big enough for the NEXT bailout.

Some people can excuse themselves for not knowing about history - Dimon was actually a part of it!

Wed, 04/13/2011 - 08:47 | Link to Comment b0nd s1nk1ng fund
b0nd s1nk1ng fund's picture

Of course there will be some contribution from decreased loan loss reserves. I hate the commentary that always points this out. It is mindless babble. You can't whine when companies are reporting losses because of increasing loss reserves then whine when those reserves come down. I do not see how that is an "accounting benefit" either based on how allowance for bad debts work. How do you know whether or not they specifically reduced their reserves, or if they had bad debts hit the reserve accounts, while choosing not to add to the reserves?

Wed, 04/13/2011 - 08:54 | Link to Comment long juan silver
long juan silver's picture

I'd trust the books of Puda Coal over this shit house of bat piss.

Wed, 04/13/2011 - 09:03 | Link to Comment curbyourrisk
curbyourrisk's picture

A POX ON ALL THEIR HOUSES.

 

I HOPE EVERYONE OF THEM DIE IN A FIRE.

Wed, 04/13/2011 - 09:06 | Link to Comment omi
omi's picture

Common, stop this sillyness. It works both ways, when it looked like all CCs would blow up and everyone would default in 08/09, reserves for losses shot up.

The general expectation was that people need to live somewhere, so they would pay their mortgage, that was actually why so many people bought into crappy MBS deals that had no chance, and default on CCs/ Credit Lines. Exactly the opposite has happened, consumer CCs were the best investments and were less of an issue that anyone would suspect. So the natural thing for banks to do is to reduce the loan loss reserves and utilize that cash to make more loans or invest it any other way.

 

For example, I'm looking at NBG. Everyone knows that Greece will default, yada yada...

I think there's a chance it won't, and so I'm slowly accumulating NBG on drops. My reasoning is that the reduction in earnings has largely to do with increases in loan reserves set aside for Greek bonds. In case my thesis plays out, those loss reserves will unexpectably come back into earnings down the road. (Not an investment advice)

Wed, 04/13/2011 - 10:22 | Link to Comment Seasmoke
Seasmoke's picture

love that credit card payments have become more valuable than mortgage payments.......doubt ANYONE saw that one coming......but as usual , you must stay ahead of the them

 

i usually pay my credit cards in full every month , but they started to take away my credit balance every month until one card which i was NEVER late took it to zero and closed me......now my other cards i ran up to the full balances and pay a couple hundred a month , so i pay interest on them for the first time ever, but it keeps me in front of them of changing the rules again and pulling the rug and of course now i owe them they will not close the accounts......

Wed, 04/13/2011 - 17:46 | Link to Comment drwells
drwells's picture

Why isn't the stock price up? WAMU used to pull the same sort of shit (play "beat the number" by counting expected reverse amortization on pay-option ARMs as current income) and that'd be good for an immediate 5% ramp job. Don't tell me someone actually took their head out of their ass in this bullgasm market...

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