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JPM Earnings Beat Courtesy Of $0.28 Benefit From Loan Loss Reserves Despite First Increase In Nonperforming Loans In Years

Tyler Durden's picture





 

Earlier today JPMorgan announced results that were better than expected, with revenue of $27.4 billion on expectations of $24.1 billion, and EPS of $1.31 or $5.0 billion, on expectations of $1.17. As previously noted, the bank increased its dividend to $0.30/share, and has authorized a $15 billion new repurchase, which however will likely not be a sizable factor, as JPM has already said with the stock price at the current level buybacks are not accretive. As for the EPS beat, as usual the one-time items swamped everything else, of which the primary one, reduction in loan loss reserves which is the traditional way for the bank to pump up the bottom line, accounting for $1.8 billion or $0.28/share. We are curious how Jamie Dimon will justify this accelerating release even as the firm's Nonperforming loans increased for the first time in years from $10 billion to $10.6 billion: just the TBTF put or something else? Other amusing "one-time" items were the $1.1 billion ($0.17/share) from the WaMu bankruptcy settlement as well as a $0.9 billion loss ($0.14/share) loss from DVA this time hurting the bank as JPM's CDS tightened in Q1. Also curious was a substantial $2.5 billion expense for additional litigation reserves, which is certainly not a one-time item now that every bank is suing JPM and is merely a catch up for Dimon to where he should have been reserved. That, or something else - just what is JPM seeing that others are not (hint: ask Bank of America). This number will continue rising. So net of the real one-time items, EPS was less than a $1.00.

Taking a look at the investment bank shows that in the traditionally strongest quarter, virtually all revenue items declined year over year. The key line here: "IB fees of $1.4B, down 23% YoY on lower industry volumes"

Highlights:

  • Fixed income and Equity markets revenue of $6.0B ($6.4B excl. DVA). Excluding DVA:
    • Fixed income revenue of $5.0B, down 2% YoY
    • Equity revenue of $1.4B, down 4% YoY

The one JPM's banker will not be happy with:

  • Expense of $4.7B, down 6% YoY, driven by lower compensation expense

Also in Q1, VaR increased to 81 from 75 in Q4 2011. It is unclear how much of this VaR can be attributed to Bruno Iksil. Since he is a whale we can only assume all his numbers are under the surface.

Those curious how much JPM is taking advantage of the NIM arbitrage differential will behappy to know that:

  • Mortgage originations of $38.4B, up 6% YoY and relatively flat QoQ
  • Retail channel originations (branch and direct to consumer) up 11% YoY and relatively flat QoQ

But the key chart is the following, which shows that no matter what happens, Jamie Dimon is happy to boost earnings by reducing his loan loss reserve, which over the past 2 years alone has generated $12.3 billion in non-earnings earnings! Naturally, loan loss reserves were down $3.9 billion from a year ago: easy money.

But far more troubling on the chart below is the first increase in nonperforming loans (green segment) to $10.6 billion for the first time in years...

Expect many questions on this table in the conference call.

Finally, JPM's presentation of its Net Interest Margin: down to 2.61% and sliding. You better hope we get some steepness in that curve soon.

Full presentation:

 

 


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Fri, 04/13/2012 - 07:38 | Link to Comment Racer
Racer's picture

These banksters have so many fiddlers the sound is deafening

Fri, 04/13/2012 - 07:45 | Link to Comment sunnydays
sunnydays's picture

It is called the Fed pumping money into JPM and them making money on all the manipulation of metals.  It is also called stealing all the MF Global gold and silver in people's accounts, besides the money they took directly from individual peoples account at MF Global.  

 

In other words it is all from stealing and pump up from the Fed.  Since they do all the business of the Fed.

Fri, 04/13/2012 - 10:42 | Link to Comment William113
William113's picture

Let's not forget that they supply EBT CARDS so of course they made a profit.

Fri, 04/13/2012 - 07:37 | Link to Comment GolfHatesMe
GolfHatesMe's picture

they would have decreased Loan Loas Reserves by $20 Billion if they had to, no way they weren't going to get the Beat headline.  PreFuckinPosterous. 

Fri, 04/13/2012 - 07:41 | Link to Comment WonderDawg
WonderDawg's picture

No shit. What a plan. Decrease loss reserves when they're insolvent but functional thanks to fraudulent but legal accounting standards. Sounds like a winner.

Fri, 04/13/2012 - 09:30 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Decrease loss reserves when they're insolvent but functional thanks to fraudulent but legal accounting standards.

FASB: Fuck America, Serve Bankers

 

Fri, 04/13/2012 - 07:42 | Link to Comment Boilermaker
Boilermaker's picture

Irrelevant.  Ben is getting ready to ass slam billions into the market again today to get the DOW above the *psyops* 13,000.

Any other 'news' is just worthless shit at this point.

Fri, 04/13/2012 - 07:46 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Dude, post more often. There are less and less sober, crass and absolutely correct maniacs such as yourself around.

Fri, 04/13/2012 - 08:09 | Link to Comment r00t61
r00t61's picture

For some reason I prefer Boilermaker giving me the finger as opposed to trav.

Fri, 04/13/2012 - 07:43 | Link to Comment Ted Baker
Ted Baker's picture

WHAT ABOUT CAR AND STUDENT LOANS?

Fri, 04/13/2012 - 07:56 | Link to Comment Boilermaker
Boilermaker's picture

Guaranteed and backed by the taxpayers (DoE) and non-defautable.

No liability to the banks.  It's a liability to you (and me).

Fri, 04/13/2012 - 07:44 | Link to Comment SeverinSlade
SeverinSlade's picture

And yet all day we get to hear on CNBS how JPM "blew expectations out of the water."

Since fundamentals no longer matter in this ponzi scheme, due diligence isn't a requirement either.  If it was, how could any investor with a brain ever buy bank stocks?

Bottom line is just accept the official statement on earnings as 100% fact.  If you decide to actually read between the lines, you might be a crazy conspiracy theorist.

Fri, 04/13/2012 - 07:49 | Link to Comment Cursive
Cursive's picture

@SeverinSlade

I hear ya, brother. The bullshit is thick, but I think "due diligence" is busy selling right now. Look at the JPM loss of trading revenue. Look at the loss of retail investors. Soon, we will see plenty more selling in size.

Fri, 04/13/2012 - 08:21 | Link to Comment ArrestBobRubin
ArrestBobRubin's picture

This really should not surprise you. What is the role of CNBS if not the promotion and marketing of the entire Illuminazi construct to the soon to be endangered species known as the Americanus Dumbassus? They've aided in every bubble blown, and they can't wait to do it again.

Raising on a busted flush? No problem, it's how they roll: they have the Lie Machine to smooth it over.

CNBS: talking head whores for the Pimps of Worthless Paper

Fri, 04/13/2012 - 07:45 | Link to Comment Cursive
Cursive's picture

Who could read this and dare to make light of data releases from the ChiComms? They are brothers in the Fraternity of Fraud. I'm an auditor/accountant and I put very ltittle weight on reported "financials.". May I never hear, "excluding one-time items" again.

Fri, 04/13/2012 - 07:50 | Link to Comment SeverinSlade
SeverinSlade's picture

I always laugh when the banks claim to use GAAP.

Although, in their defense, they aren't lying.

"GENERALLY" their accounting principles are accepted...except when they actually experience a loss...then it's time to fuck with the numbers!

Fri, 04/13/2012 - 08:05 | Link to Comment WonderDawg
WonderDawg's picture

GAAP is different for the banks than for the rest of the world. GAAP for the banks makes it acceptable to cook the books any way needed to make it look good.

Fri, 04/13/2012 - 08:08 | Link to Comment Cursive
Cursive's picture

@WonderDawg

Trust me. It ain't just the banks doing the home cooking.

Fri, 04/13/2012 - 07:47 | Link to Comment disabledvet
disabledvet's picture

"proof in the pudding is in the eating." we'll see how their stock price responds. "move along people." this has been dead money for over a decade now.
http://seekingalpha.com/symbol/hbc?source=search_general&s=hbc
"divesting non-core assets" is the key here.

Fri, 04/13/2012 - 07:54 | Link to Comment chump666
chump666's picture

meaningless.  this market will correct brutally despite JPM earnings or other Wall Street banks.  JPM got lucky pre the coming market wipeout.

Fri, 04/13/2012 - 08:08 | Link to Comment ArrestBobRubin
ArrestBobRubin's picture

Insolvency = Earnings Beat

War = Peace

Slavery = Freedom

Crime = Business

See how things work in Illuminazi World?

Fri, 04/13/2012 - 08:13 | Link to Comment LongSoupLine
LongSoupLine's picture

Dear Jamie,

 

Now tell us what your Mark to Market numbers are.

Fuck you,

the truth followers of ZH

Fri, 04/13/2012 - 08:15 | Link to Comment peekcrackers
peekcrackers's picture

JMP 156 Trill in CDS ..world GDP 56 Trill .. how can you not.

Fri, 04/13/2012 - 08:22 | Link to Comment youngman
youngman's picture

They will make money...they have the Central Bank behind them....and the regulators like the SEC and the CME looking the other way...easy money

Fri, 04/13/2012 - 08:22 | Link to Comment highwaytoserfdom
highwaytoserfdom's picture

70T in http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq411.pdf    

 

systemic mess defined years ago buy Poole on GSE's now being repeated in china...  Usury, finance, welfare real estate, education (lack of) blow-back of Czar and central planning... Heck communist had 5 year plans and now FED is twisting 30 year plans FEDS 14 Czars.  

BLOWBACK  it's primary dealer fascism protecting oligopolies and cartels. 

Fri, 04/13/2012 - 08:46 | Link to Comment Robslob
Robslob's picture

Until "stanks" and all other corporate pools of waste are required to pay taxes based off "earnings" there is nothing but fraud and deceit.

The game will change but they will ALL know in advance in order to make money from the fall...sometime in 2013 it all starts to blow...slowly at first then suddenly...just like the last 3 times...

Fri, 04/13/2012 - 09:08 | Link to Comment monopoly
monopoly's picture

Never, ever invest in a broken bank. I don't care if BAC goes to 50 I would never stoop to that level to try and trade these disgusting excuses for banks. They are the lowest of the low. Every one of their CEOs both past and present should be indicted and put away and stripped of all their ill gotten gains. They move their numbers around at will so you never know the real picture.

Until you come to Zero Hedge and read what is real. 

Fri, 04/13/2012 - 10:03 | Link to Comment Seasmoke
Seasmoke's picture

still brings a smile to my face that i beat Jamie out of $8000

Fri, 04/13/2012 - 12:27 | Link to Comment JW n FL
JW n FL's picture

 

 

I can NOT! Beleive that this made any video coverage outside of RT / Max Keiser / Press TV!

WOW!!

Real Information is SOOOOOOOOOOOOOOOOOOOOOOO!! Trendy! LOL!!

It is just a FAD!! Misdirectional Meme's will be En Vogue' Soon(ish), again..

http://www.youtube.com/watch?v=JeaG39vzqF0

Do NOT follow this link or you will be banned from the site!