(Reuters) ? JPMorgan Chase & Co's quarterly earnings fell 25 percent, excluding an accounting gain, as the European debt crisis pushed investment banking clients to the sidelines.
The results are the first for the third quarter from a major U.S. bank and underscore how market turmoil has clobbered underwriting and merger advisory fees. JPMorgan shares were down 5.5 percent in midday trading Thursday, pulling down other big bank stocks.
"There were some very strong headwinds for JPMorgan," said Marshall Front, chairman of Front Barnett Associates LLC.
JPMorgan Chief Executive Jamie Dimon said the company will cut 1,000 jobs in its investment bank over the next 18 months. Banks globally are laying off staff as new regulations squeeze potential profits and as stock and corporate credit markets weaken. But Dimon said JPMorgan's cuts are mainly due to increased use of automation.
The bank did post 1 percent loan growth, which Dimon said was a positive for the economy. The bank's return on equity, a measure of profitability, was 9 percent, close to the 10 percent that some analysts view as a likely long-term average for major banks under new regulations and capital rules.
JPMorgan posted quarterly earnings of $4.3 billion, or $1.02 per share, down from $4.4 billion, or $1.01 per share, in the same quarter last year.
The results were muddied by adjustments for the market value of the bank's debt, which gave it a $1.9 billion pre-tax gain. When the bank's debt weakens relative to U.S. Treasuries, it can record an accounting gain because it could profit from buying back debt.
FALLING FEES
Despite the weak environment in investment banking, JPMorgan bought back $4.4 billion of stock during the quarter, and its diluted outstanding shares fell about 3 percent.
"We have a tremendous amount of capital," Dimon said in a conference call with reporters.
Said David Dietze, chief investment strategist at Point View Wealth Management in Summit, New Jersey, "They are putting their money where their mouth is.
"(The buyback) shows a degree of confidence. They don't see a cash crunch. The takeaway here is to be more optimistic about regional bank results but not be jumping up and down about the prospects of Morgan Stanley and Goldman Sachs."
Dimon has complained publicly and in private meetings with regulators that capital surcharges for the biggest banks are unfair and will stymie lending and economic growth.
Shares of Bank of America Corp, Citigroup Inc, Morgan Stanley and Goldman Sachs Group Inc were down between 4 percent and 5.5 percent. All are due to report third-quarter results next week.
JPMorgan took a valuation adjustment for its widening bond spreads that amounted to 29 cents a share after taxes in the third quarter, it said. Given the company's share count, that amounts to $1.1 billion. Stripping out that figure from the quarterly earnings shows a profit decline of 25 percent from a year earlier.
Further complicating the calculation, the bank generated losses from this same item in last year's third quarter.
The third quarter was rough for investment banks, as the U.S. stock market, as measured by the S&P 500 index, dropped 14 percent. Investment-grade corporate bond spreads widened by more than 50 percent, according to Bank of America Merrill Lynch indexes, an eye-popping move.
With markets gyrating that much, many companies are reluctant to acquire rivals or issue securities. JPMorgan said its fees for underwriting and merger advisory were down 31 percent from a year earlier to $1 billion in the quarter. Revenue from stock and bond trading was down 14 percent, not counting the accounting gain.
"Obviously, the worse Europe gets, the worse it is for us, but we think it is something we can handle, just like we handled 2008," Dimon said.
Staffing in the investment bank fell to 26,615 in the quarter from 27,716 in the second quarter. Dimon said many of the coming job cuts in the investment bank would be from attrition.
The bank reported a private equity loss of $347 million during the quarter, compared with net income of $344 million a year earlier, and $1 billion of litigation expense, mainly for mortgage-related items, down from $1.3 billion last year.
The report from JPMorgan comes as the industry struggles to hold onto recent profits after losing tens of billions of dollars in the financial crisis.
Shares of JPMorgan have fallen with other bank stocks, losing 22 percent their value this year through Wednesday, compared with a 3.5 percent drop in the S&P 500.
(Reporting by David Henry in New York, additional reporting by Clare Baldwin; editing by John Wallace)
plane crash lake powell reno nevada lion king 3d lion king 3d the lion king 3d the lion king 3d
No comments:
Post a Comment