JPMorgan profits jump as ‘Whale’ losses put behind

By AFP Oct 13th, 2012 ( No Comment )

New York: JPMorgan Chase’s third quarter earnings surged 34 percent, the US banking giant said Friday, as it put behind the $6 billion of losses racked up earlier this year in its “London Whale” derivatives trade debacle.Profits surged in most areas of business, but especially on a turnaround in the bank’s own investment activities and improvement in its mortgage business, the bank said.

The chief investment office, the proprietary trade unit responsible for the massive derivatives losses in the first and second quarter, took another $449 million loss on that portfolio.

But the bank said that the positions at the CIO had been finally “closed out”.

The positions had mostly been transferred to JPMorgan’s investment banking side, with large writedowns. Chief executive Jamie Dimon said in a conference call Friday that he hoped the trading debacle, which shocked the banking world when revealed in May, was behind the bank.

The vestiges of the trade are “kind of in a range I wouldn’t worry much about for the future,” he said.

“Hopefully we’re not going to talk about it in the future.”

In the three months to September 30, the largest US bank by assets reported net income at $5.71 billion, up from $4.26 billion a year ago and from $4.96 billion the previous quarter.

Earnings per share for the quarter was $1.40, up from $1.02 a year earlier.

Analysts had expected earnings to come in at around $1.21 per share, but that failed to boost the stock.

After having jumped on Thursday, the shares were trading down 1.5 percent in mid-session trade at $41.48.

The earnings upturn came mainly from a reversal of losses in the CIO.

The CIO and treasury operations, together with private equity, turned a $221 million profit, after racking up a $645 million loss a year ago and a $1.78 billion loss the previous quarter.

The earnings boost was also helped by a decrease in provisioning: the bank set aside another $1.79 billion for possible losses, down 26 percent from a year earlier.

Dimon said he saw improvements in most areas of business, especially an increase in its mortgage business.

He said the bank believes the US housing market “has turned the corner,” allowing it to cut its mortgage-related loss reserves by $900 million.

Going ahead, he said, “I think (mortgage) origination will stay high.”

However, “My guess is spreads will come down over time.”