After three better-than-expected bank earnings announcements, investors are beginning to act as if the worst is over for the financial crisis. But are these earnings reports based on a fundamental improvement in the business climate and the banks' strategies, or one-time events? The answer is a bit of both. There is a significant amount of one-time gimmickry in the numbers, coupled with trillions in capital and big interest rate cuts from the U.S. intended to help banks rebuild their capital.
Here are the numbers for the three banks:
JPMorgan Chase (JPM) earned $2.1 billion worth of net income, or 40 cents a share, which was eight cents a share more than analysts had expected, but down 40 percent from last year. JPMorgan took a $6 billion charge for bad loans and set aside another $4.2 billion in provision for more bad loans. The good news was profits from near zero percent interest rates and trading gains. JPM's stock is up a mere three percent so far in 2009 and it has no plans to repay its $25 billion piece of the TARP.