Key highlights from the just released JPM results:
- JPMorgan 2Q adj. EPS $1.27 vs est. $1.21; rev. $26.78b vs est. $24.91b
- CEO Jamie Dimon sees card losses improving next quarter, sees mortgage taking some time to resolve issues, possible we will incur additional costs along the way
- 2Q reserves $29.1b, release of $1.3b vs release of $2.6b in 1Q, coverage ratio 3.83% vs. 4.1% in 1Q
- I-banking: rev. $7.31b, down 11% Q/q, up 16% Y/y
- Fixed inc/equity mkt rev. $5.5b, down 16.7% Q/q, up 19.6% Y/y
- I-banking fees $1.9b, up 37% Y/y
- Hired more than 10,000 employees year-to-date
The one issue that everyone is concerned about - mortgage exposure:
“With respect to our mortgage portfolio, delinquency and net charge-off trends improved modestly compared with the prior quarter; however, net charge-offs remained high, and we expect credit losses to remain elevated. We have been working hard to fix our problems and address past mistakes. We have already incurred significant costs, charged-off substantial amounts and established significant reserves for mortgage-related issues. Unfortunately, it will take some time to resolve these issues and it is possible we will incur additional costs along the way. However, in time, these costs will normalize as well.”
On Investment Banking and recent trends in sales and trading:
Net revenue was $7.3 billion, compared with $6.3 billion in the prior year. Investment banking fees were up 37% to $1.9 billion, consisting of debt underwriting fees of $866 million (up 24%), equity underwriting fees of $455 million (up 29%), and advisory fees of $601 million (up 69%). Fixed Income and Equity Markets revenue was $5.5 billion, compared with $4.6 billion in the prior year, reflecting solid client revenue. Credit Portfolio revenue was a loss of $111 million, primarily reflecting the negative net impact of credit-related valuation adjustments, largely offset by net interest income and fees on retained loans.
As to why Jamie is God's new servant...
“Through the recession, we have helped hospitals, school systems, banks, state governments, countries and central banks, and we will continue to do so. During the first six months of 2011, JPMorgan Chase provided credit to and raised capital of over $990 billion for our clients. We originated mortgages to more than 360,000 people; we provided credit cards to approximately 4.6 million people; we lent or increased credit to more than 16,800 small businesses; we lent to more than 800 not-for-profit and government entities, including states, municipalities, hospitals and universities; we extended or increased loan limits to approximately 3,000 middle-market companies; and we lent to or raised capital for more than 5,000 other corporations. We are the #1 Small Business Administration lender in the U.S., with more loans made than any other lender. In 2009 and 2010, we lent more than $7 billion and $10 billion, respectively, to small businesses, and we have committed to lend at least $12 billion more this year. We remain committed to helping homeowners and preventing foreclosures. Since the beginning of 2009, we have offered 1,177,000 trial modifications to struggling homeowners.”
Full presentation supplement: