JP Morgan Chase Start Banking Sector Third Quarter Reporting

As the first of U.S. big banks to report its third quarter results, JP Morgan Chase revealed that it had earned $4.4 billion during this time, representing an increase of 23 percent compared to the same period last year. Earnings per share for the New York-based Fortune 500 company was recorded at $1.01, beating polled expectations of 90 cents a share. Furthermore, the funds set aside to cover bad loans, referred to as the provision for credit losses, was reduced to $3.2 billion, down a whopping 67 percent compared to last year’s third quarter. The increase of sales volume in the card services division of the bank was 7 percent, with the commercial banking unit reporting $1.5 billion in revenue. Conversely, there was a decline of 33 percent in the company’s investment banking profits. Nonetheless, Chief Executive Jamie Dimon noted that he was cautiously optimistic about the economic outlook of the country, as well as that of JP Morgan Chase. He further reiterated that the bank is fully committed to promoting economic recovery and anticipated hiring more than 10,000 workers throughout the United States in the coming year. Moreover, Dimon revealed that he was hopeful that the bank’s quarterly dividend will be reinstated in the first quarter of 2011 – good news indeed for investors.

The fly in the ointment for JP Morgan Chase, and other US banks, is the investigation into whether foreclosures, which resulted in tens of thousands of Americans losing their homes, had been handled correctly. Of the estimated total of 1.8 million loans in foreclosure by American mortgage servicing business in the 23 US judicial states, and an additional 1.3 million pending in other states, JP Morgan Chase is reportedly reviewing around 115,000 of its foreclosure cases across 41 states. In order to deal with the investigation,JP Morgan Chase has added $1.3 billion to its reserves for legal costs, as well as $1 billion to its mortgage repurchase reserves.

While this was a mix of good and bad, but mostly good, news to start off third quarter reporting by the banking sector, investors appeared unimpressed, with JP Morgan Chase stock remaining flat in late morning trading Wednesday. Next week will see the release of reports by Citigroup, Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo.