Instant View: JPMorgan Chase earnings jump, shares fall

NEW YORK (Reuters) -JPMorgan Chase & Co, the second largest U.S. bank by assets, reported fourth-quarter profit jumped to $3.3 billion from $702 million in the previous year, helped by strong results from its investment bank unit.

The New York-based bank reported a quarterly profit of 74 cents a share, compared to 6 cents a share in the year earlier quarter.

But the bank reported revenue of $25.2 billion in the fourth quarter, below analysts forecasts, and shares fell nearly 2 percent in early trading.

Analysts on average expected a profit of 61 cents a share, according to Thomson Reuters I/B/E/S.

The following is reaction from industry analysts and investors:

GARY TOWNSEND, CHIEF EXECUTIVE, HILL-TOWNSEND CAPITAL

"In general it looks like a pretty strong report and clearly most of their businesses are doing pretty well. The weakness appears to have been in their retail banking operation, more specifically in their consumer lending, where rates of charge-offs on credit card, home equity and prime mortgage remain quite elevated. They say that there are some signs of stability in consumer delinquency trends but they worry that the trends won't continue and it will be interesting to hear in the commentary whether they think the overall levels of provisioning will be declining from here.

"They have built a very large, perhaps unprecedented allowance for loan loss. It's five and a half percent of total assets so that would seem to be quite robust to cover future losses, but we'll hear what they say. They will undoubtedly continue to reserve -- it's a question of the rate going forward, and much of that depends on the direction of the economy, which is outside of their control."

JAMIE COX, MANAGING PARTNER AT HARRIS FINANCIAL GROUP IN COLONIAL HEIGHTS, VIRGINIA

"They're continuing to add to loan loss reserves and I think that was the big disappointment.

"Everybody had high hopes that this would be the quarter where reserves would start to decline and that's one of the reasons for revenue being a little shallow.

On the profit line they're doing what we expect them to do, making record profits.

In every business line they're making an enormous amount of money but it's being tempered by the need to reserve against future losses.

The dividend also didn't change. I think the dividend policy and the loan loss reserves were the pieces of information that made this a 99 percent perfect quarter versus a 100 percent perfect quarter.

JPMorgan is the bellwether, it is the best, most well capitalized, best managed bank. You would hope they'd be the first bank to be able to begin the process of paring down loan loss reserves."

NEIL SMITH, ANALYST AT WESTLB, GERMANY "There's a very big plus and a very big minus in investment banking. The big plus is that compensation expenses were massively lower in Q4, which shows they've been listening to the regulators. The minus is lower revenue, though a fall as expected. The big delta is less from principal transactions.. The question is how the market will interpret the fall. "

DAVID BUIK, PARTNER AT BGC PARTNERS, LONDON

"JPMorgan top-line results were disappointing. The provisions for bad-debt were disappointing, investment banking was a lot lower than people thought and clearly the fixed interest did not perform in the same manner as it did in the past."

"There were pressures on credit card lending and retail banking and it just shows the U.S. economy is far from out of the woods."

CHRISTIAN TEGLLUND BLAABJERG, CHIEF EQUITY STRATEGIST, SAXO BANK, COPENHAGEN

"Loan losses continue to put the earnings in JPMorgan under pressure and despite solid earnings in asset management and investment banking the question remains as to whether JPMorgan will be able to meet expectations for earnings in 2010. We remain skeptical."

GEOFF WILKINSON, HEAD OF INVESTMENT RESEARCH AT MINT SECURITIES, LONDON

"We are very close to the recent short-term highs which are about $44.8. Before you get comfort about buying this (JPMorgan), you need to see it start to push up and maybe close above $44.80 levels. People are selling very near the highs, made the middle of last week. Bear in mind, you could have bought this yesterday at around $43 levels. It had rallied 4 percent ... yesterday. People might be cautious buying now ... You need to see above $44.80 to attract more buyers."

MICHAEL HOLLAND, PRESIDENT OF HOLLAND & CO IN NEW YORK

"The numbers look excellent and once again Jamie Dimon and the management of JPMorgan have shown why they are regarded as the best in the business."

"The revenues were the reason the stock traded off a little bit."

"Not only does the recent past look brighter than people expected, but the present and future look brighter today that people suspected for JPMorgan. All in all it is an excellent report."

DAVID DIETZE, CHIEF INVESTMENT OFFICER, POINT VIEW FINANCIAL SERVICES

"I don't think we can take away from these results that we are any further along in the recovery than we thought we were. I think what was a little disappointing was the sharp increase in consumer loan loss reserves. That was almost double expectations just shy of $2 billion. We were looking for more in the lines of $900 million. That says to me there is still a great deal of caution out there as to the recovery and when credit quality was going to return.

"Obviously revenues fell shy. It may have reflected a slowdown in trading in the fourth quarter a little bit more than due to holiday lightened schedules, which suggests some caution in the capital markets."

PETER BOOCKVAR, EQUITY STRATEGIST AT MILLER TABAK & CO IN NEW YORK

"They missed revenue by a decent amount, and I think that's why the stock is falling right now. The earnings fell from the prior year but it looks like they beat estimates, so we'll see what happens. In general, I think the market has priced in a lot of these results, from JPMorgan to Alcoa to Linear Tech."

(Reporting by Blaise Robinson, Joanne Frearson. Dominic Lau, Steve Eder, Ryan Vlastelica, Leah Schnurr and Clare Baldwin)