J.P. Morgan reports net rise of 62%

[PeterGibbons]

J.P. Morgan reports net rise of 62%
Bloomberg News, THURSDAY, JANUARY 19, 2006

NEW YORK J.P. Morgan Chase said on Wednesday that fourth-quarter profit rose 62 percent on a gain from an asset sale and cost cuts that cushioned a surge in credit card defaults.

Earnings climbed to $2.7 billion, or 76 cents a share, from $1.67 billion, or 46 cents, a year earlier, the New York-based bank said, beating analysts' estimates. Revenue rose 6 percent, to $13.7 billion.

The sale of J.P. Morgan's online brokerage, BrownCo, resulted in a $752 million gain.

A drive by the bank's chief executive, James Dimon, to cut $3 billion in costs from the July 2004 purchase of Bank One helped to raise profit in retail banking and asset management. Higher demand for merger advice and stock underwriting offset a 37 percent plunge in fixed-income trading revenue.

"There is a lot to come out of the cost side," a Sandler O'Neill Partners analyst, Jeffery Harte, said. "The big synergies for the merger came out of things like getting the two credit card operations on the same platform. We're just starting to see the benefits from that."

Non-interest expenses fell 9 percent, to $8.54 billion, as Dimon eliminated jobs, sold real estate and combined computer systems.

J.P. Morgan's retail bank posted an operating profit of $803 million, up 4 percent. Revenue increased 1 percent, to $3.59 billion, while the unit's non-interest expenses fell 3 percent.

In wealth management, revenue also rose faster than expenses, helping to raise earnings 30 percent, to $342 million. Commercial banking profit rose 14 percent, to $289 million, as revenue climbed 6 percent.

J.P. Morgan was expected to earn $2.5 billion, or 72 cents a share, on revenue of $14.3 billion, the average estimates of 20 analysts surveyed by Thomson Financial.

Operating profit at J.P. Morgan's investment bank, which generates the biggest share of the company's profit, rose less than 1 percent, to $664 million in the fourth quarter. Revenue was little changed at $3.19 billion.

Revenue from fixed-income trading fell to $735 million, a decline of 37 percent from the fourth quarter of 2004 and 65 percent from the third quarter of last year.

"Several of our trading books were on the wrong side of interest rates," Dimon said on a call with reporters. "It was a bunch of positions that didn't work out."

J.P. Morgan's push into energy trading, an expansion intended to reduce swings in the fixed-income business, ended up hurting the company in the fourth quarter.

"The hope was that it would reduce volatility, but this quarter it added to it," Dimon said. "We lost money as opposed to making money on it."

Investment banking fees rose 8 percent, to $1.18 billion. The company said in a presentation on its Web site that the fee "pipeline" from deals not yet completed was "strong" and it expected trading revenue to rise in 2006.

J.P. Morgan shares fell 48 cents to close at $39.23 in New York Stock Exchange composite trading.

The stock had jumped 18 percent since the bank reported a record third-quarter profit and said Dimon, then president and chief operating officer, would succeed William Harrison as CEO six months earlier than planned. Harrison remains J.P. Morgan's chairman.

The bank said operating profit at its credit card business, the world's second-biggest after Bank of America, plunged 41 percent, to $302 million. The unit set aside $2.2 billion for credit losses, up 29 percent from a year earlier, because of the surge in bankruptcy filings.

NEW YORK J.P. Morgan Chase said on Wednesday that fourth-quarter profit rose 62 percent on a gain from an asset sale and cost cuts that cushioned a surge in credit card defaults.

Earnings climbed to $2.7 billion, or 76 cents a share, from $1.67 billion, or 46 cents, a year earlier, the New York-based bank said, beating analysts' estimates. Revenue rose 6 percent, to $13.7 billion.

The sale of J.P. Morgan's online brokerage, BrownCo, resulted in a $752 million gain.

A drive by the bank's chief executive, James Dimon, to cut $3 billion in costs from the July 2004 purchase of Bank One helped to raise profit in retail banking and asset management. Higher demand for merger advice and stock underwriting offset a 37 percent plunge in fixed-income trading revenue.

"There is a lot to come out of the cost side," a Sandler O'Neill Partners analyst, Jeffery Harte, said. "The big synergies for the merger came out of things like getting the two credit card operations on the same platform. We're just starting to see the benefits from that."

Non-interest expenses fell 9 percent, to $8.54 billion, as Dimon eliminated jobs, sold real estate and combined computer systems.

J.P. Morgan's retail bank posted an operating profit of $803 million, up 4 percent. Revenue increased 1 percent, to $3.59 billion, while the unit's non-interest expenses fell 3 percent.

In wealth management, revenue also rose faster than expenses, helping to raise earnings 30 percent, to $342 million. Commercial banking profit rose 14 percent, to $289 million, as revenue climbed 6 percent.

J.P. Morgan was expected to earn $2.5 billion, or 72 cents a share, on revenue of $14.3 billion, the average estimates of 20 analysts surveyed by Thomson Financial.

Operating profit at J.P. Morgan's investment bank, which generates the biggest share of the company's profit, rose less than 1 percent, to $664 million in the fourth quarter. Revenue was little changed at $3.19 billion.

Revenue from fixed-income trading fell to $735 million, a decline of 37 percent from the fourth quarter of 2004 and 65 percent from the third quarter of last year.

"Several of our trading books were on the wrong side of interest rates," Dimon said on a call with reporters. "It was a bunch of positions that didn't work out."

J.P. Morgan's push into energy trading, an expansion intended to reduce swings in the fixed-income business, ended up hurting the company in the fourth quarter.

"The hope was that it would reduce volatility, but this quarter it added to it," Dimon said. "We lost money as opposed to making money on it."

Investment banking fees rose 8 percent, to $1.18 billion. The company said in a presentation on its Web site that the fee "pipeline" from deals not yet completed was "strong" and it expected trading revenue to rise in 2006.

J.P. Morgan shares fell 48 cents to close at $39.23 in New York Stock Exchange composite trading.

The stock had jumped 18 percent since the bank reported a record third-quarter profit and said Dimon, then president and chief operating officer, would succeed William Harrison as CEO six months earlier than planned. Harrison remains J.P. Morgan's chairman.

The bank said operating profit at its credit card business, the world's second-biggest after Bank of America, plunged 41 percent, to $302 million. The unit set aside $2.2 billion for credit losses, up 29 percent from a year earlier, because of the surge in bankruptcy filings.

NEW YORK J.P. Morgan Chase said on Wednesday that fourth-quarter profit rose 62 percent on a gain from an asset sale and cost cuts that cushioned a surge in credit card defaults.

Earnings climbed to $2.7 billion, or 76 cents a share, from $1.67 billion, or 46 cents, a year earlier, the New York-based bank said, beating analysts' estimates. Revenue rose 6 percent, to $13.7 billion.

The sale of J.P. Morgan's online brokerage, BrownCo, resulted in a $752 million gain.

A drive by the bank's chief executive, James Dimon, to cut $3 billion in costs from the July 2004 purchase of Bank One helped to raise profit in retail banking and asset management. Higher demand for merger advice and stock underwriting offset a 37 percent plunge in fixed-income trading revenue.

"There is a lot to come out of the cost side," a Sandler O'Neill Partners analyst, Jeffery Harte, said. "The big synergies for the merger came out of things like getting the two credit card operations on the same platform. We're just starting to see the benefits from that."

Non-interest expenses fell 9 percent, to $8.54 billion, as Dimon eliminated jobs, sold real estate and combined computer systems.

J.P. Morgan's retail bank posted an operating profit of $803 million, up 4 percent. Revenue increased 1 percent, to $3.59 billion, while the unit's non-interest expenses fell 3 percent.

In wealth management, revenue also rose faster than expenses, helping to raise earnings 30 percent, to $342 million. Commercial banking profit rose 14 percent, to $289 million, as revenue climbed 6 percent.

J.P. Morgan was expected to earn $2.5 billion, or 72 cents a share, on revenue of $14.3 billion, the average estimates of 20 analysts surveyed by Thomson Financial.

Operating profit at J.P. Morgan's investment bank, which generates the biggest share of the company's profit, rose less than 1 percent, to $664 million in the fourth quarter. Revenue was little changed at $3.19 billion.

Revenue from fixed-income trading fell to $735 million, a decline of 37 percent from the fourth quarter of 2004 and 65 percent from the third quarter of last year.

"Several of our trading books were on the wrong side of interest rates," Dimon said on a call with reporters. "It was a bunch of positions that didn't work out."

J.P. Morgan's push into energy trading, an expansion intended to reduce swings in the fixed-income business, ended up hurting the company in the fourth quarter.

"The hope was that it would reduce volatility, but this quarter it added to it," Dimon said. "We lost money as opposed to making money on it."

Investment banking fees rose 8 percent, to $1.18 billion. The company said in a presentation on its Web site that the fee "pipeline" from deals not yet completed was "strong" and it expected trading revenue to rise in 2006.

J.P. Morgan shares fell 48 cents to close at $39.23 in New York Stock Exchange composite trading.

The stock had jumped 18 percent since the bank reported a record third-quarter profit and said Dimon, then president and chief operating officer, would succeed William Harrison as CEO six months earlier than planned. Harrison remains J.P. Morgan's chairman.

The bank said operating profit at its credit card business, the world's second-biggest after Bank of America, plunged 41 percent, to $302 million. The unit set aside $2.2 billion for credit losses, up 29 percent from a year earlier, because of the surge in bankruptcy filings.
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Peter Gibbons
SunnyGardens.com

[iFinancialAdviser]

Regardless of how you feel about banks' business practice, they deliver solid results. Good dividends, stock prices keep going up, etc.
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Online Finance Education :: College Degrees

[PeterGibbons]

Yes, they typically seem to be good long term investment vehicles. Definitely not for the impatient investor, though.
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Peter Gibbons
SunnyGardens.com

[iFinancialAdviser]

[PeterGibbons]

You are absolutely correct about that! The impatience would be taking more of a risk to gain 10-25% on something else, instead of relying on sound fundamentals and being content with 5-10%.
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Peter Gibbons
SunnyGardens.com