JPMorgan Chase easily exceeds forecasts

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JPMorgan Chase & Company kicked off earnings season for the nation’s big banks on Thursday with news of a strong gain in second-quarter profit.

After powering ahead for the last year on the strength of its Wall Street trading operations, JPMorgan said its net income rose 76 percent, to $4.8 billion, from $2.7 billion in the period a year earlier. Earnings rose to $1.09 a share, from 28 cents.

The results benefited from a one-time release of $1.5 billion in loan loss reserves.

JPMorgan shares, however, were down 1.4 percent, as concerns about weak manufacturing pushes the entire market lower.

Revenue declined 8 percent, to $25.6 billion, in the second quarter, from $27.7 billion in the period a year ago.

The results — which exceeded of analysts’ expectations of 70 cents a share — were the start of a rush of quarterly results from major banks. Citigroup and Bank of America are scheduled to report results on Friday, with Goldman Sachs, Morgan Stanley and Wells Fargo to follow next week.

JPMorgan emerged from the global financial crisis bigger, stronger and healthier than many rivals. But like other big banks, it still confronts fallout from the recession, with potential losses on its portfolio of home mortgages and consumer loans. The jittery markets, unnerved by the European debt crisis and May’s flash, tempered trading results for JPMorgan and its main rivals.

Even so, Jamie Dimon, JPMorgan’s chairman and chief executive, seemed cautiously optimistic that the worst for his bank — and the industry — was behind. For the first time since the crisis began, JPMorgan released money from the reserves it had set aside to cover future losses.

The $1.5 billion benefit, or an after-tax gain of 36 cents, came from a reduction in loan loss reserves amid a modest improvement in housing and job markets, as well as signs that corporate borrowers were in better shape.

“I have always called that income paper,” Mr. Dimon told investors on a conference call. “It means nothing. Put it this way, we will take down reserves only if we have to.”

Still, Mr. Dimon stopped short of saying the economy was turning around. “Although we are gratified to see consumer lending net charge-offs and delinquencies decline, they remain at extremely high levels,” he said. “It is too early to say how much improvement we will see from here.”

With the permission of its regulators, the bank bought back more than $500 million in shares in the second quarter. Tellingly, however, it did not did not raise its dividend. Mr. Dimon said late last month that he planned to await further improvement in the economy and more clarity about minimum capital requirements before contemplating an increase. He had previously hinted such a move could come in the second half of 2010.


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