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JPM Beats Thanks To Ongoing Loan Loss Reserve Releases; NIM And Trading Revenues Decline, CIO Posts Loss

Tyler Durden's picture




 

The much anticipated JPM earnings are out and while the company beat superficially, posting Q4 revenue of $24.4 billion vs expectations of $24.3 billion, and adjusted EPS of $1.35 "ex-items" vs expected $1.22, the real story as usual is below the surface. And in this case below the surface means what happens with the firm's Net Interest Margin, Trading Revenues, Loan Loss Reserve Releases and, of course, the busted "CIO and Treasury" aka London Whale unit. Starting with the last we have this: "Treasury and CIO reported a net loss of $157 million, compared with net income of $417 million in the prior year. Net revenue was a loss of $110 million, compared with net revenue of $845 million in the prior year. Net revenue included net securities gains of $103 million from sales of available-for-sale investment securities during the current quarter and principal transactions revenue of $99 million. Net interest income was a loss of $388 million due to low interest rates and limited reinvestment opportunities." JPM also warned to "Expect Treasury and CIO net loss of $300mm +/- in 1Q13; likely to vary each quarter."

Funny how the once amazingly profitable CIO is no longer is a cash cow when it can't invest excess deposits and recycle reserves via repo into cornering the IG market. Next, loan loss reserve releases amounted to some $0.9 billion in Q4, with total loan losses declining to $21.9 billion in Q4. This is 15% of the reported net income even as nonperforming loans rise by $1.7 billion compared to Q4 2011.

Trading revenues were better than Q4 2011, but much weaker than Q3 with fixed income markets revenues amounting to $3.2 billion, down $0.5 billion from Q3, and equity markets $0.9 billion, down $149MM from the last quarter. The reported VaR declined to $106 from Q3's $122, but up from the $75 in Q4 2011, which was reported pre-CIO bust. Total assets under custody rose to a whopping $18.8 trillion, up from $18.2 trillion last quarter, and $16.9 trillion in Q4 2011. $18.8 trillion?

Finally, the Net Interest Margin, firmwide and core, declined by 3 and 7 bps respectively QoQ due to, per JPM, lower loan yields, lower yields on  investment securities; limited reinvestment opportunities; and higher balances in Fed funds sold and certain secured financings. In other words, ZIRP continues to take its toll on a bank which can no longer be a hedge fund and which can't make money on the NIM curve.

Oh, and those curious who is buying Italian loans? It's JPM (among others): JPM reports $13.9B total firmwide European peripheral net exposure as of 4Q12, up from $11.7B as of 3Q12. Net exposure increased primarily due to the impact of client transactions in Italy.

From the earnings supplement, here are the full Q4 results:

One time charges:

Loan Loss Reserve Release:

 

JPM banking and trading revenues:

Net Interest Margin:

European Exposure:

Full report:

 

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Wed, 01/16/2013 - 08:38 | 3157069 GetZeeGold
GetZeeGold's picture

 

 

Oh, and those curious who is buying Italian loans? It's JPM (among others):

 

Was just thinking I need to get me some of that.

Wed, 01/16/2013 - 08:46 | 3157081 stocktivity
stocktivity's picture

It doesn't matter.  All the fat ass bankers will beat estimates. Benny will see to it (on the taxpayers dime).  Just keep printing of money out of thin air. ...It's all Bullshit!!

Wed, 01/16/2013 - 08:54 | 3157091 economics9698
economics9698's picture

When you own the printing press you make all the right moves. 

Wed, 01/16/2013 - 09:33 | 3157146 JPM Hater001
JPM Hater001's picture

"Net exposure increased primarily due to the impact of client transactions in Italy."

The initials wouldnt be BB would they?

Wed, 01/16/2013 - 09:55 | 3157238 1eyedman
1eyedman's picture

corzines bets would have paid off if he had more time....he must of gotten too greedy (even for his crowd) and they cut him off

Wed, 01/16/2013 - 08:39 | 3157072 tawse57
tawse57's picture

Markets should soar today then. JP Morgan and Goldman, and Apple, leading the markets higher.

Panic over.

Wed, 01/16/2013 - 08:51 | 3157085 Sudden Debt
Sudden Debt's picture

these are not the crashes you're looking for...

you should look for something else...

Wed, 01/16/2013 - 08:48 | 3157083 Sudden Debt
Sudden Debt's picture

Being on the board of the FED when you're a bank : PRICELESS!!

Wed, 01/16/2013 - 09:31 | 3157145 economics9698
economics9698's picture

Yes it is since 1913!

Wed, 01/16/2013 - 08:51 | 3157084 brewing
brewing's picture

who doesn't beat superficially...

Wed, 01/16/2013 - 08:53 | 3157089 youngman
youngman's picture

They will always beat...always..its a rigged casino....its not GOOD business...its better Theft.......

Wed, 01/16/2013 - 08:53 | 3157090 Catullus
Catullus's picture

Finally, the Net Interest Margin, firmwide and core, declined by 3 and 7 bps respectively QoQ due to, per JPM, lower loan yields, lower yields on  investment securities; limited reinvestment opportunities; and higher balances in Fed funds sold and certain secured financings. In other words, ZIRP continues to take its toll on a bank which can no longer be a hedge fund and which can't make money on the NIM curve.

That's where the compressed yeild curve by the Fed eats away at the banks.  It's cool, they just imagineer the money and have the Fed monetize it anyway

Wed, 01/16/2013 - 08:56 | 3157092 SuperDeDuper
SuperDeDuper's picture

All companies will 'beat' expectations, thats why the analyst drop their expectations so low, so it looks good, but it may not be as good as it was anticapted months ago, however markets cheer and soar to new heights, flying like eagles in the sky over the american dream.  Ugghhh.

Wed, 01/16/2013 - 09:52 | 3157229 1eyedman
1eyedman's picture

why hasnt WFC  loan loss reserves release been disseminated?    we hear NIM is lower and mortgage volume is much lower, but they still crushed yoy....how much was the release????

Wed, 01/16/2013 - 10:30 | 3157368 chinaboy
chinaboy's picture

good summary.

Wed, 01/16/2013 - 10:41 | 3157399 q99x2
q99x2's picture

Keiser's latest report talks about how JP Morgue has moved into cornering all commodity markets and manipulation of prices within each to increase upcoming revenues.

Wed, 01/16/2013 - 11:11 | 3157533 Dineroguru
Dineroguru's picture

Give me unlimited capital for ZERO and I will post some good numbers too!  Help me Bennie  HELP!!!

Wed, 01/16/2013 - 11:51 | 3157659 MillionDollarBoner_
MillionDollarBoner_'s picture

JPM reports $13.9B total firmwide European peripheral net exposure as of 4Q12, up from $11.7B as of 3Q12. Net exposure increased primarily due to the impact of client transactions in Italy."

What could possibly go wrong?!?

FUCK YOU, JAMIE DIMON!!!

Thu, 01/17/2013 - 01:14 | 3161275 sun tzu
sun tzu's picture

Of course they should release all their loan loss reserves. The Fed is buying up all their toxic assets at par. A crackhead could be a Wall Street banker with Ben Shalom at the helm.

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