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.
INVESTMENT BANKING
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.
COMMERCIAL BANKING:
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.
ASSET MANAGEMENT:
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)
Tags: Earnings, JP Morgan Chase
