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JPMorgan Chase & Company, BP Plc, Wells Fargo, Goldman Sachs and Morgan Stanley

^{Published on 2010-07-16 14:11:00 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: JPMorgan Chase & Company(NYSE: [ JPM ]), BP Plc (NYSE: [ BP ]), Wells Fargo (NYSE: [ WFC ]), Goldman Sachs (NYSE: [ GS ]) and Morgan Stanley (NYSE: [ MS ]).

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Here are highlights from Thursdaya™s Analyst Blog:

JPMorgan Powers Ahead

JPMorgan Chase & Companya™s(NYSE: [ JPM ]) second quarter earnings came in at $1.09 per share, substantially ahead of the Zacks Consensus Estimate of 71 cents. The results also soared from the earnings of 28 cents in the prior-year quarter.

The very impressive results were primarily supported by a slowdown in loan loss reserves, which more than offset a pressure on trading and investment banking revenues and a $550 million charge related to the U.K. bonus tax.

Behind the Headlines

Net income available to common shareholders was $4.8 billion, up 76% from $2.7 billion in the prior-year quarter. A significantly lower provision for credit losses primarily drove the results. However, lower revenues and higher non-interest expenses were the offsetting factors.

Managed net revenues for the quarter came in at $25.6 billion, down 8% from $27.7 billion in the year-ago quarter.

Managed non-interest revenues were $12.8 billion, down 1% from $13.0 billion in the prior-year quarter. The decrease was driven by lower principal transaction revenues as a result of weak trading performance and lower investment banking fees, partially offset by higher securities gains. Net interest income was $12.8 billion, down 13% year-over-year. The decline in net interest income was due primarily to JPMorgana™s lower loan balances.

Non-interest expenses for the quarter were $14.6 billion, up 8% from $13.5 billion in the prior-year quarter. The increase was driven by higher litigation expenses and the impact of the U.K. bonus tax.

The managed provision for credit losses decreased 65% year-over-year to $3.4 billion. Total consumer provision for credit losses was $3.9 billion, down 54% from $8.5 billion in the year-ago quarter. This reflects a reduction in the allowance for credit losses as a result of improved delinquency trends and reduced net charge-offs.

Evaluation of Credit Quality

JPMorgana™s credit quality was mixed during the quarter. As of June 30, 2010, nonperforming assets were $18.2 billion, up from $17.5 billion in the prior-year quarter but down from $19.0 billion in the previous quarter. Consumer net charge-offs decreased to $5.5 billion from $7.0 billion in the prior quarter. As a result, the managed charge-off rate improved to 5.34% from 6.18% in the prior-quarter.

Evaluation of Capital

JPMorgan maintained a strong capital position with an estimated Tier 1 Common Capital ratio of 9.6% as at June 30, 2010, versus 9.1% as at March 31, 2010 and 7.7% as at June 30, 2009.

Book value per share of common stock was $40.99 as of June 30, 2010, compared with $39.38 as of March 31, 2010 and $37.36 as of June 30, 2009.

Though the concerns related to the impact of the upcoming financial reform bill and JPMorgana™s exposure to BP Plc (NYSE: [ BP ]) have overshadowed its share price in recent days, the shares were up by about 0.5% in before-market trade following the announcement of second quarter results.

Following congressional approval, the financial reform bill would partially restrict proprietary trading of commercial banks. Also, dealing in derivatives would be restricted, which are used to hedge risk or speculate the future value of assets. As a result, a significant impact on profitability is expected for the commercial banks including JPMorgan, Wells Fargo (NYSE: [ WFC ]), Goldman Sachs (NYSE: [ GS ]) and Morgan Stanley (NYSE: [ MS ]).

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