Record Earnings at J.P. Morgan Fail to Excite Investors

J.P. Morgan Chase & Co. (NYSE: JPM) reported fiscal third-quarter results before markets opened this morning. The banking and finance giant posted record diluted earnings per share (EPS) of $1.40 on revenues of $25.9 billion. In the same period a year ago, the company reported EPS of $1.21 on revenues of $24.37 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.21 and $24.53 billion in revenues.

Third-quarter earnings include a net gain of $0.04 per share on one-time items, compared with a net gain of $0.05 per share in the same period a year ago.

Jamie Dimon, the bank's CEO, said:

[W]e believe the housing market has turned the corner. In our Mortgage Banking business, we were encouraged that credit trends continued to modestly improve, and, as a result, the Firm reduced the related loan loss reserves by $900 million. Despite this improvement, the absolute level of charge-offs remains elevated. We also expect to see high default-related expense for a while longer. We are acting responsibly to help homeowners and prevent foreclosures, offering nearly 1.4 million mortgage modifications and completing 578,000 since 2009. Credit trends in our credit card portfolio continued to improve, and the wholesale credit environment remained stable.

The bank reported that its fortress balance sheet had improved from a common ratio 9.9% to 10.4% on Basel I Tier 1 capital and that it estimates that its Basel III Tier I common ratio improved from 7.9% in the second quarter to 8.4% in the third quarter.

J.P. Morgan recorded another $449 million in losses related to the "London Whale" debacle that caused the bank to restate first-quarter results and take a trading loss of $5.8 billion, with more possibly to come.

Net consumer charge-offs rose from $2.7 billion in the same period a year ago to $2.8 billion. The total provision for credit losses was down 26% from a year ago, to $1.8 billion and the total provision for credit losses fell by $432 million to $1.9 billion.

Nonperforming assets totaled $12.5 billion at the end of September, up sequentially from $11.4 billion and flat compared with the same period a year ago.

The bank did not offer any further guidance in its published release. The consensus estimate for the fourth quarter calls for EPS of $1.15 on revenue of $23.91 billion. For the 2012 fiscal year, EPS is reckoned at $4.75 on revenue of $97.8 billion.

J.P. Morgan's shares are up fractionally in premarket trading at $42.11 in a 52-week range of $28.28 to $46.49. Thomson Reuters had a consensus analyst price target of around $46.13 before today's report.

Paul Ausick