Jamie Dimon appears to have escaped the worst if you look through the earnings and trading losses at J.P. Morgan Chase & Co. (NYSE: JPM). While the initial reaction shows that the stock was down and then up, the fortress bank reported $1.21 EPS versus a Thomson Reuters estimate of $0.70 EPS; revenues were $22.18 billion versus estimates of $21.9 billion. That earnings figure includes $4.4 billion or $0.69 per share in pre-tax losses from CIO trading losses (the London Whale).
The bank’s tier-1 capital ratio is 11.7% and its tier-1 common ratio was 10.3%. Chase opened 1.6 million new credit card accounts in the second quarter. The bank will also restate its first quarter to reflect $459 million in pre-tax CIO losses.
When you read through the report you will see why J.P. Morgan remains one of the 7 safest banks in America.
Here is what Jamie Dimon is hanging his hat on: the worst case future losses from the trading loss debacle will be another $800 million to $1.6 billion, implying that the worst case loss scenario would come to about $6.7 billion.
What is surprising is that J.P. Morgan’s book value per share at the end of the second quarter came to $48.40 per share, versus $47.48 at the end of the first quarter and up from $44.77 a year ago. Here are some other statistics and notes from earnings:
- Credit card sales volumes were up 12% in the second quarter;
- Treasury and securities assets under custody were up 4% to $18 trillion;
- Total headcount was 262,882 at the end of the quarter;
- Total equity was $191.57 billion at the end of the quarter.
If you look at the negative news flow of the last six weeks or so and then look at the earnings report today, it is almost impossible to stay as critical as the debacle seemed. Technically the results are bad because of the black eye and the damage to the bank’s reputation. Still, the worst appears to be behind the bank as far as this multi-billion trading loss is concerned. The bank’s shares are now up 1.6% at $34.61 in pre-market trading with about two hours until the market opens. Its 52-week trading range is $27.85 to $46.49.
JON C. OGG