About those bank profits…

Thursday, July 15, 2010, 10:17 AM
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It’s earning season again, and ‘investors’ are going to be fueled by reports of strong earnings and earnings growth in the banking industry, especially among the giants.

Some of these gains will be real, and some will be due to accounting gimmicks that are quite difficult to assess by any but fully-dedicated analysts.  For example, massive swings in provisions for loan losses are now a normal part of the bank-earnings management cycle, which makes accurate comparisons between periods quite difficult.

JPMorgan Profit Rises, Beating Estimates

JPMorgan Chase & Co., the second- biggest U.S. bank by assets, said profit rose 76 percent, more than analysts estimated, as a reduction in provisions for soured mortgages and credit-card loans buoyed results.

Second-quarter net income climbed to $4.8 billion, or $1.09 a share, from $2.72 billion, or 28 cents, in the same period a year earlier and from $3.33 billion in the first quarter, the New York-based company said today in a statement.

Of course, left out of the first few paragraphs is the fact that JPM also reduced their provisions for future losses in their retail division by more than $2 billion.


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