Archive for the ‘JP Morgan Chase’ Category

January 15th, 2010

JP Morgan Results- Increased Earnings and Higher Credit Loss Provisions.

The first of the mighty banks have started rolling out their results. JP Morgan disclosed a big bump in the revenues of its investment banking division. The financial statements on the whole were characterized by a higher amount of Credit loss provisions a possible indicator of future defaults and a weaker credit environment.




This division showed a huge bump in its Q4 Net Income and Revenues compared with the same period last year. Provision for credit losses was actually a benefit for Q4 2009 as compared to Q4 2008 driven by lower loan balances, loan sales and repayments.




Effect of the higher credit loss provisions can be seen specially in the Commercial banking division. These provisions increased by almost 160% to $ 494 million for Q4 2009 up by $ 304 million for Q4 2008. Commercial Banking net income on the other hand declined to $ 224 million, a fall of 53% compared to full year 2008.




Both net income and net revenues are up as compared to 2008. Business Metrics for this division indicate an increase int eh number of Client advisors, Retirement planning services participants as well as ….surprise ….Bear Stearn brokers. How the number of Bear Stearn brokers can increase over 2008 is a little hard to understand.


For the company as a whole, for the full year 2009, $100 billion has been kept aside for Compensation expenses as compared to $ 67 billion for 2008. Compensation as a percentage of net revenue actually declined to 27% as compared to 34% for 2008. For Investment Banking division alone, there has been a drop in the percentage of compensation to revenue to 33% from 62% for 2008.


JP Morgan’s spectacular earnings don’t seem to have buoyed the market. As you can see from the image below, these results seem to have dampened JP Morgan’s performance in the market. (Courtesy: The Wall Street Journal)


JP MORGAN Stock Chart

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January 11th, 2010

Adventure Sports: Diving Deep Into Compensation.

With all the bank compensation hoopla going on, I thought it would be a good idea to see where banks stood with their compensation figures for 2009.


It’s JP Morgan Chase for today.


Having exited the TARP program quite a while back, it has been free to independently determine its compensation amount and structure as compared to some of the other banks that took till the end of 2009 to do so.


Reviewing JP Morgan’s Form 10k for 9 months ended September 2009, showed markedly increased compensation expense as compared to the same period in 2008. Compensation expense for this 9 month period stood at $ 21816 million as compared to $ 17722 million in 2008. JP Morgan attributes this increase of 23% to the takeover of Washington Mutual and an increase in performance based compensation.


In JP Morgan’s Investment Bank, compensation for the 9 months ended September 2009 has also increased from $6535 million to $ 8785 million. Investment bank compensation increase constitutes almost 55% of the total compensation increase during the 9 months of 2009. Also, investment bank compensation as a percentage of its total revenue for the 9 months ended Sept 2009 stood at 37% a steep drop from 53% for the same period in 2008……probably a good thing too.


JP Morgan appears unperturbed by Goldman Sachs and Morgan Stanley announcing their new stock based bonus plans for top executives. Stock based compensation as per JP Morgan’s 10K stands at $ 2435 million, a modest increase from $ 2085 million for 2008. Any increase here could be considered a step in the right direction.


CEO James Dimon like Goldman’s Blankfein will continue to receive a salary and a bonus (though bonus in all probability will not be in pure stock). With the entire investor world and Main Street USA focused on bank compensation, it should be interesting to watch how these banks balance to keep their employees happy while warding off public focus.


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