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The earnings season for big banks is starting off in positive territory, and well above analysts' expectations. ""JPMorgan Chase & Co."":http://investor.shareholder.com/jpmorganchase/releasedetail.cfm?ReleaseID=458901 reported last week that it brought in net income of $3.3 billion during the first quarter of 2010, or $0.74 per share. The market was expecting earnings of $0.65 a share.
[IMAGE]The 55 percent improvement over the New York bank's $2.1 billion profit in the first quarter of 2009 was largely due to big gains in its investment banking business, particularly in fixed income markets. JPMorgan's consumer credit portfolios didn't fare as well, producing ""high losses,"" as CEO Jamie Dimon described it. But the bank's chief did indicate that loan quality is improving and delinquencies are beginning to stabilize.
But even with what sounded like a more upbeat outlook than portrayed in previous earnings announcements, JPMorgan is continuing to play it safe, setting aside even more funds to cover potential loan losses. The bank's provision for credit losses in its real estate portfolios was $3.3 billion, reflecting an addition of $1.2 billion for losses expected from further deterioration in the prime and option-ARM credit-impaired portfolios JPMorgan ""inherited with its acquisition"":http://dsnews.comarticles/probe-finds-wamus-demise-in-subprime-lending-regulatory-turf-war-2010-04-16 of Washington Mutual.
[COLUMN_BREAK]Average mortgage loans were $124.4 billion, down by $17.0 billion. The bank explained the total included $3.6 billion reflecting the consolidation of loans in accordance with new accounting guidance that took effect January 1, 2010. Mortgage originations in the first quarter were down 9 percent compared to the previous three months.
Average home equity loans were $125.7 billion, down by $16.1 billion. Home equity originations were $302 million, down 67 percent from the prior year and 25 percent from the prior quarter â€" a decline easily explained by the overall diminishing equity continuing to spread throughout markets across the nation.
JPMorgan also took a sizeable hit from mortgage repurchases and mortgage litigation. The numbers reflected a $432 million charge for buybacks of securitized mortgages, with typically suggests underwriting discrepancies. A $2.3 billion legal expense was mostly attributable to mortgage-related disputes.
According to JPMorgan, though, homeownership preservation is one front where the bank continues to perform strong. Dimon said his company's efforts to prevent foreclosures ""have produced significant results.""
He explained that since the beginning of 2009, the bank has extended 750,000 trial modification offers to struggling homeowners, of which nearly 25 percent have been approved as a permanent restructuring.
JPMorgan approved 64,000 modifications during the first quarter alone, a 146 percent increase from last quarter. The company also recently announced its participation in the administration's second-lien mortgage program known as 2MP.
""While these modification programs are complex to implement and take time to build momentum, we are beginning to see success and believe they could ultimately prevent millions of foreclosures,"" Dimon said.
