Financial services giant JP Morgan Chase & Co. (JPM: Quote) reported Friday a lower second-quarter profit, hit by a hefty trading loss at its Chief Investment Office or CIO. Revenues declined, but surpassed Wall Street estimates. The company restated first quarter profit on extent of losses related to CIO.
Jamie Dimon, chairman and chief executive officer of the company said, "Importantly, all of our client-driven businesses had solid performance. However, there were several significant items that affected the quarter's results - some positively; some negatively."
The company said its quarterly results reflected items including $4.4 billion of losses on CIO's synthetic credit portfolio, $1.0 billion of securities gains in CIO and a $545 million gain on a Bear Stearns-related first-loss note, for which it currently sees full recovery.
Commenting on heavy trading loss at its London office, Dimon said CIO will no longer trade a synthetic credit portfolio and will focus on its core mandate of conservatively investing excess deposits to earn a fair return.
The results also included $755 million of DVA gains, reflecting adjustments for widening of its credit spreads, which do not reflect the underlying operations. Provision for credit losses plunged 88 percent to $214 million.
In the second quarter, the company's net income declined to $4.96 billion or $1.21 per share from $5.43 billion or $1.27 reported last year. On average, 23 analysts polled by Thomson Reuters expected earnings per share of $0.72 for the quarter. Analysts' estimates typically exclude one-time items.
Total net revenues, on a reported basis, dropped 17 percent to $22.18 billion. On a managed basis, net revenue was $22.89 billion, lower than $27.41 billion in the previous year. Analysts estimated revenues of $21.90 billion for the quarter.
Profit declined 7 percent in the Investment Bank division, with a 7 percent decline in revenues and a provision for credit losses compared with a benefit in the prior year.
The Retail Financial Services reported a net income of $2.27 billion, compared with $383 million in the prior year. Net revenues grew 11 percent from last year.
In Card Services &Auto, net income declined 7 percent to $1.0 billion, with revenues declining 5 percent from a year ago. Commercial Banking net income increased 11 percent from the preceding year and Treasury & Securities Services net income surged 39 percent from a year ago.
Separately, the company said it will restate its previously-filed financial statements for the first quarter of 2012, which will reduce its first-quarter net income by $459 million. The restatement is related to valuations of certain positions in synthetic credit portfolio in the firm's Chief Investment Office.
JPM closed Thursday's regular trading at $34.04 on the NYSE. In the pre-market activity, the shares are up 1.88 percent.
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by RTT Staff Writer
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