JPMorgan Chase & Co’s first-quarter profit was not as good as last year’s, but it told investors what they wanted to hear: Banking is not dead.
JPMorgan said on Thursday it earned US$2.14 billion for the period from January to last month, thanks to both strong trading activity and banking to average consumers.
Like other banks, JPMorgan is still seeing its loan defaults increase. The company’s credit costs amounted to US$10 billion — that’s US$6 billion from loan losses and US$4 billion to build up reserves.
And it anticipates that losses will keep rising in credit cards, home equity loans, mortgages and commercial real estate loans.
But the company is benefiting from growth in deposits, a rise in mortgage refinancing and low borrowing rates. When a bank can borrow cheaply, it can profit more from lending.
It can also earn more from trading and investing — like Goldman Sachs Group Inc, JPMorgan pulled in record revenue in the first quarter from buying and selling bonds.
The bank said it sold US$3 billion in 10-year bonds on Thursday at 6.3 percent interest, its first sale in US dollars in the past month without backing from the US’ Federal Deposit Insurance Corp.
Not only did JPMorgan profit from the wider rate spreads, but it also gained market share from its purchase of Bear Stearns and took advantage of historically high issuance in the bond market.
“January, February and March were some of the biggest bond months ever,” JPMorgan chief executive Jamie Dimon said in a conference call.
The bank earned US$2.14 billion, or US$0.4 per share, on record revenue of US$26.9 billion in the first quarter. It earned US$2.37 billion, or US$0.67 per share, a year earlier. Analysts predicted a profit of US$0.32 per share, Thomson Reuters said.
JPMorgan is one of several bailout recipients, including Wells Fargo, Morgan Stanley and Goldman Sachs, expressing interest in repaying their government debt soon. JPMorgan got US$25 billion from the government late last year to keep the financial system stable and increase lending.