JPMorgan’s Second-Quarter Profit DID NOT Rise 76%

All the financial journalists and market pundits — who don't really know anything about finance nor the markets — where surprised that a better-than-expected quarter by JPMorgan didn't spark the markets.

Here's an interesting quote: "Develop a healthy distrust of “experts” and for what universally passes as authoritative analysis." attributed to Gerald Celente.
So why are these experts surprised?
(DealBook) JPMorgan said its net income rose 76 percent, to $4.8 billion, from $2.7 billion during the comparable period a year earlier. Earnings rose to $1.09 a share, from 28 cents.

Revenue declined 8 percent, to $25.6 billion, in the second quarter, from $27.7 billion in the quarter a year ago.

JPMorgan’s chairman and chief executive, Jamie Dimon, said that the bank’s increase in net income included “the benefit from a $1.5 billion reduction of loan-loss reserves — which we do not believe represents normal ongoing earnings — partially offset by a charge of $550 million for the U.K. bonus tax.

  1. Basically, $1.5 billion out of the $4.8 billion where coming from an accounting trick. About 33% of the profits came from reducing the loan-loss reserve, while defaults on home mortgages as well as HELOC and credit cards have reached historical highs?
  2. They paid $550 million for the UK Bonus Tax? If you remember correctly, this bonus tax was a 50% one-off tax paid on bonus above £25k, about $37k at that time. It means that JPMorgan paid in 2009 more than $1.1 billion in bonus to the UK employees only.
So who would like to be the shareholder of such a company? It's good to be one of the massively overpaid traders but definitely not a shareholder...

For more in-depth analysis of the earnings, you can have a look at this post on BoomBust.

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