Wednesday, October 14, 2009

Things That We Get Out Of JP Morgan's ER

the Dow closed at the all-too-important 10,000 mark after JP Morgan (JPM)'s earnings release beat analysts' estimates by a wide margin.The bank reported a profit of 82 cents per share and $28.78 billion in revenue during the third quarter. Analysts forecast a profit of 52 cents per share and  $24.96 billion revenue.

Fixed income in the investment banking division drove the results

JPMorgan said its investment bank net income came to $1.92 billion, up $1 billion from a year earlier as fixed income trading thrived.

Fixed income markets accounted for two-thirds of the investment bank's $7.51 billion in revenue. While the company's trading operations were strong, JPMorgan was also able to write up the value of some investments that have started to recover after souring during the peak of the credit crisis.

Credit card and home loan losses increased.

The bank's loss provision to cover current and future home loan defaults jumped to $3.99 billion, while its provision for credit card losses surged to $4.97 billion.

JPMorgan said the percentage of credit card loans it wrote off as not being repayable in the third quarter reached 10.3 percent of its total portfolio. CFO Cavanagh said during a separate call with analysts that the card loss rate is expected to reach 10.5 percent in the first half of 2010 and could go higher depending on the unemployment rate.

"Credit costs remain high and are expected to stay elevated for the foreseeable future in the consumer lending and card services loan portfolios," Dimon said.

My Takes
Fixed income trading will be the bright spot of financials in the near future and more write-ups of assets will be seen as the credit market eases. Off the top of my head, let's just toss a few names that might benefit from the trend. Among them BLK, BX,IVZ, JEF,GLG,KFN,RJF.

Disclaimer: Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author owns KFN but NOT other stocks mentioned above in her personal account as of October 14,2009

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