JP Morgan Chase beats earnings, maintainins efforts to help the economy recover
JPM CEO Jamie Dimon commented: "We are maintaining our efforts to help the economy recover."
Gosh, I am so relieved… I want my TARP money back…. Now.
JPM JP Morgan Chase beats by $0.08, beats on revs (32.56 )
Reports Q1 (Mar) earnings of $0.40 per share, $0.08 better than the First Call consensus of $0.32; revenues on a reported basis rose 48.2% year/year to $25.02 bln vs the $22.95 bln consensus. Revenues on a managed basis (GAAP) rose 50.4% year/year to 26.92 bln. As of March 31, 2009, JPM reported a Tier 1 Capital ratio of 11.3%, or 9.2% excluding TARP capital from the government. Tangible common equity compared to risk-weighted assets was 7.2%, the allowance for credit losses was $28 bln and the firmwide loan loss coverage ratio stood at 4.53%. CEO Jamie Dimon commented: "We remain focused on capital and balance sheet strength. These levels of capital and reserves, combined with our significant pre-provision earnings power, enable us to withstand an even worse economic scenario than we face today." Dimon further remarked: "We are maintaining our efforts to help the economy recover. We continue to lend and have extended approximately $150 billion in new credit to consumer and corporate customers during the first quarter. We made additional progress on our foreclosure prevention program, opening the remaining 22 of our 24 new Chase Homeownership Centers during the quarter, and continued working towards our goal of preventing 650,000 foreclosures by the end of next year to help keep people in their homes." Looking ahead to the rest of 2009, Dimon concluded: "It is reasonable to expect additional increases to credit reserves if the economic environment worsens. Yet, we are confident that even a highly adverse economic scenario would not compromise our overall strength and stability – or our ability to enhance our franchises. We remain well-positioned to benefit when the economy recovers and remain committed to serving our clients, investing in our franchise and building a stronger company for the future." Net income in JPM’s investment bank was $1.6 bln vs a Q108 loss of $87.0 mln. Net revenue in this segment increased 177% year/year to $8.34 bln. As for card services, net loss was $547.0 mln vs net income of $609.0 mln in Q108, a decline of $1.2 bln year/year.
FBR maintains their pessimistic outlook for consumer credit; seasonality evident as early stage delinquencies and roll-rates moderated
Friedman Billings notes that yesterday, six of the largest credit card issuers (AXP, BAC, C, COF, DFS, and JPM) released their trust data metrics for the month of March. Average trust losses for the six issuers was 8.53%, up 51 bps m/m and at 108 bps, losses at COF increased the most from the prior month, while losses at BAC increased the lowest, at 19 bps. March data did little to change their pessimistic outlook for consumer credit for the industry given the recent unabated increases in the unemployment rate. They anticipate as the seasonal improvements wear off, net charge-offs for the industry could reach double digits at year-end. The effect of seasonality was fairly evident in the March data as early stage delinquencies and roll-rates moderated, as tax refunds were likely increasingly used to reduce debt in this new age of consumer thrift. However, late stage roll-rates, defaults, and loss levels remain elevated and greater than those reflected in Street ests. They note AXP’s losses were the highest on an absolute basis at 9.72%; reit Underperform on AXP and Market Perform on COF.
With most major banks posting profits now, there is the illusion that the banking-part of the crisis is over. However, the only reason they are able to do this is because they are borrowing our money at near 0-percent interest. Am I wrong? Isn’t this just a facade? When the next wave of defaults hits, led primarilly by commercial real estate loans, aren’t we just going to go through all this again? Appreciate feedback.
[quote=Patrick Brown] Isn’t this just a facade? [/quote]
Changes to fair-value, or mark-to-market accounting rules approved by FASB on April 2 allow firms to use "significant" judgment in gauging prices of some investments on their books, including mortgage-backed securities. The changes, which apply to first-quarter results, could boost capital balances by 20 percent and earnings by as much as 15 percent, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc., who now runs his own tax and accounting advisory firm in New York.
Banks will also be allowed to exclude from net income any losses they deem "temporary," making it easier to provide a flattering earnings picture, said Kersting at Edward Jones.
The accounting changes probably won’t offset loan charge- offs that are growing so quickly "that by the end of the year all the top-line revenue will be eaten up by credit costs," according to Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.
Here are a few facts:
- Banks have received LOTS of public money above and beyond TARP such as the $1+ trillion from the Fed for their other assets such as auto loans, corporate paper, MBS, etc. The amount handed out by the Fedd makes TARP look like chump-change. The Fed then allows the banks to recycle all this new money BACK INTO the fed at a higher rate of interest effectively handing free money to the banks (as a risk free carry-trade). Once we strip out the fancy acronyms and the sleight-of-hand mechanism that round trips these money and assets between the banks and the Fed, the Fed has effectively been recapitalizing the banks with free money.
- Lending is not happening at anything remotely close to prior levels. Banks are not lending to companies, for big real estate deals, for securitization activities – nothing. One wonders, then, how JPM managed to extend $150 billiojn in new credit? I need to see the details on that. It beggars belief.
Seriously, I cannot figure out how I am supposed to believe all this. Banks make money by lending money.
The only thing I can figure is that much is explained by trading gains and it would not surprise me in the least to learn that JPM has been on the right side of both the the recent (and puzzling) stock market gains and drops in the price of gold.
After all, our leaders have made it crystal clear that nursing the banks back to health, at any cost, is their plan. If this includes a bit of insider trading or counting "loans to the Fed" as "new credit" then I suppose the ends justify the means, right?
[quote=cmartenson]Seriously, I cannot figure out how I am supposed to believe all this. Banks make money by lending money.[/quote]
No, Chris, that’s the old paradigm. Where have you been?
In the new paradigm, banks make money by working in close cooperation with corrupt public officials to transfer public wealth into their hands using mechanisms of constantly escalating complexity, thus assuring that the press and general public are left unable to comprehend what is happening before their eyes in broad daylight. Haven’t you been reading your own writing?
My feeling? Once the bank reporting is out of the way and the end of year IRA and 401k valuations are done (am I right in thinking that these occur next week? I live in the UK) then I reckon we’ll see a correction.The market in the UK went up big time around the time of G20 and end of financial year (one day the UK was up nearly 200 when the S & P was DOWN 30!).
I could be wrong…
Back in November when Goldman switched from an investment bank to a regular bank they switched to calendar year reporting.
If I am not mistaken, their results for December were not required to be accounted for or reported in their quarterly earnings report.
They reported making $1.8B in 1Q but if you account for the December results – where they actually lost $1.3B – GS really only made $1.5B from Dec 08 through March 09.
But they reported earnings on the order of ~$4.5B???
As my old high school calculus teacher was fond of saying “The proof will be left up to the interested student.”
What a squandered opportunity for Goldman Sachs to report something they didn’t need to to tell the completlyaccurate picture and to display some professional courage and industrial leadership.
GE General Electric beats by $0.05, misses on revs (12.27 )
Reports Q1 (Mar) EPS from continuing operations of $0.26 per share, $0.05 better than the First Call consensus of $0.21; revenues fell 9.0% year/year to $38.41 bln vs the $39.83 bln consensus. Segment profit fell 27% in the quarter, as strong 19% growth at Energy Infrastructure was more than offset by a 58% decline at Capital Finance and a 45% decrease at NBC Universal. GE Capital Services’ (GECS) revenues fell 20% over last year to $14.4 bln. Industrial sales were $24.0 bln, down 1% from the first quarter of 2008. Industrial organic revenue held steady year over year. Co says, "Capital Finance earned $1.1 bln in the quarter and remains on track to be profitable for the full year… Revenues and profitability declined y/y in our financial services business and we continue to experience rising delinquencies. However, we have taken prudent actions to address these challenges, including tightening risk requirements, improving liquidity and reducing leverage. Also, questions about credit ratings have been resolved. We still have a strong rating and our outlook is stable… We are running GE for the long term. Over the last six months, we have made the difficult decisions to raise equity and cut the dividend to keep GE safe and secure. On March 19, we conducted a ‘deep dive’ into GE Capital that demonstrated the strength of our team and our commitment to transparency. Estimated stress-test results showed that we do not need to raise additional capital even in the Fed’s adverse-case scenario."
C Citigroup beats by $0.16, beats on revs (4.01 )
Reports Q1 (Mar) loss of $0.18 per share, reflects reset in January 2009 of the conversion price of $12.5 bln convertible preferred stock issued in private offering in January 2008, $0.16 better than the First Call consensus of ($0.34); revenues rose 99.3% year/year to $24.8 bln vs the $21.95 bln consensus. The $0.18 loss per share reflected the reset in January 2009 of the conversion price of the $12.5 bln convertible preferred stock issued in a private offering in January 2008. This did not have an impact on net income but resulted in a reduction to income available to common shareholders of $1.3 bln or $0.24 per share. Without this reduction, EPS were positive. The loss per share also reflected preferred stock dividends, which did not impact net income but reduced income available to common shareholders by $1.3 bln. Deposit base remained relatively stable at $763 bln compared to Q408, despite the challenging environment. Deposits declined 8% since the Q108, due to the sale of the German retail banking operations and the impact of foreign exchange. U.S. deposits increased $8 bln sequentially and $28 bln year/year. Global Cards GAAP revenues declined 10%, mainly due to higher credit losses flowing through the securitization trusts in North America. On a managed basis, Global Cards revenues grew 3% and North America increased 6%. Revenues in the current quarter included a $1.1 bln pre-tax gain on the sale of Redecard shares. Consumer Banking revenues declined 18%, driven by a 42% decline in investment sales, the impact from foreign exchange changes on non-U.S. dollar revenues as they are converted to U.S. dollars for reporting purposes. The Tier 1 capital ratio was approx 11.8% vs 7.7% in Q108 and 11.9% in Q408. The sequential decline in the Tier 1 capital ratio was largely due to the consolidation of $82 bln of card-related securitization assets for regulatory capital purposes, largely offset by higher Tier 1 capital and a reduction in other risk-weighted assets.
C Citigroup provides update on timing of exchange offers (4.01 ) -Update-
Co announces that it continues to finalize definitive documentation with the U.S. government regarding the government’s previously announced commitment to exchange a portion of its preferred shares with an aggregate liquidation value of up to $25 bln for interim securities and warrants. Citi is also working to complete the customary SEC review process with respect to the public exchange offers announced on February 27, 2009. Additionally, the U.S. government is finalizing its previously announced industry stress tests, the results of which are anticipated to be available in the near term. Given the now anticipated proximity of the announcement of stress test results by the U.S. government, the proposed exchange offer will not be launched until the conclusion of the industry stress tests. Citi also confirmed its intention to continue to pay full dividends on the preferred shares through and until the closing of the public exchange at which point these dividends will be suspended. As previously announced, it is Citi’s intention not to pay common stock dividends during this period. Citi also reconfirms that it has no plans to suspend distributions at current rates on its Trust Preferred Securities and Enhanced Trust Preferred Securities.
I have said this before and I am saying it again:
Wall street has lets say $10,000 in buying power and main street has $100 in buying power ((100 to 1 ratio)) than:
Crises "must do something NOW"
Government gives Wall street $10,000 (total $20,000) in buying power from thin air to start lending and main street still has $100 buying power ((200 to 1 ratio)) but must pay interest on $10,000 at some % per year.
Wall street does not lend. Inflation starts happening normally 6 to 9 months after the crises. After one year:
50% inflation so Wall street now has $10,000 in buying power and main street has $50 in buying power ((200 to 1 ratio) plus interest on their additional buying power.
At what actual level this happens, I am not so sure about. However, in very simple terms the buy power of our economy is switching and the banks seem to believe everything is a bad investment (no lending). So they wait, let everything weak die getting assets for pennies on the dollar and all the strong at wholesale prices.
"What a bargain!"