J.P. Morgan Chase Results: Four Analyst Quick Takes

J.P. Morgan Chase Results: Four Analyst Quick Takes

  • Posted Wednesday, October 14, 2009 -
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The market is making a higher run out of the gates, after J.P. Morgan Chase's third-quarter earnings soared on strong investment-banking results. The improvement in I-banking counterbalanced another sizable amount socked away to cover loan losses.

The bank set aside $2 billion to cover current and future losses from consumer loans, a decision that reflects the bank's tradition of protecting its balance sheet even as many bankers see a slowdown in the rate delinquencies are increasing, according to The Journal.

Here are a few quick takes from analysts on the results:

Deutsche Bank: "JPM reported 3Q EPS of $0.82 vs. consensus of $0.52. The biggest driver of the beat was robust trading revenues-both within the investment bank and in the corporate/unallocated segment (which incl $900m of after tax trading income or $0.23 per share). Credit was mostly in line with expectations. Mgmt's outlook on credit included no change in the outlook for mortgage losses vs. previous expectations, while the outlook for credit card is slightly worse."

BofA Merrill: "Investors are looking for signs of Consumer credit stabilization, but in the press release the company noted that while it sees some signs of this (clearly referring to the mortgage book), its too early to be sure of a lasting trend; and in Cards, as expected, losses continue to rise because unemployment has not yet shown signs of peaking. Last quarter the Conference call commentary was more encouraging than the press release, so there may be more color later."

UBS: "Credit mostly worse: managed [net charge offs] 4.30% vs. 4.0% in 2Q, commercial banking [net charge offs] ratio +44bps to 1.11%; cards [net charge offs] 10.3% (21.94% WAMU, 9.41% Chase), & in retail financial services, [home equity lines of credit] improved, but prime/subprime worse. 2. Mgmt commented while we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue. 3. Treasury & Securities services, net income -20%. 4. Cards lost $700mm. 4. Not much deposit growth."

Morgan Stanley: "[Investment banking] revenues were driven by better than expected trading and underwriting results, offset by higher than expected [debt-valuation adjustments] and lower [mark-to-market] gains. Card Services was better than expected on better top line and higher spending as well as significantly better than expected credit performance."

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