JPMorgan money managers hit by downturn

Thu Oct 13, 2011 12:39pm EDT

(Reuters) - JPMorgan Chase & Co said third-quarter earnings in its asset and wealth management division were hurt by turbulent markets and customer withdrawals.

The bank also offered a muted outlook for these businesses in the coming year.

JPMorgan, the first major U.S. bank to report third-quarter results, said its asset management and private wealth businesses together generated $389.5 million in profit on $2.3 billion in revenue. Earnings fell 8 percent from a year earlier, reflecting litigation expenses and a bigger payroll.

"Asset Management (results will be) obviously dependent on market levels, but we continue to build the business and even (during) this quarter we had net inflows," JPMorgan Chief Executive Jamie Dimon said in a conference call.

U.S. stocks were hammered in the quarter by Europe's spreading debt crisis, a downgrade of the United States' credit rating and a sluggish economy.

The July-September period was the worst quarter for stocks since 2008. The Standard & Poor's 500 Index fell by more than 14 percent. U.S. equity declines wiped out $2.2 trillion of market value for the Wilshire 5000 index.

Among JPMorgan's institutional, mutual fund and private client money managers, revenue fell 9 percent while profit slumped 12 percent on higher expenses. Hiring efforts in asset management added 291 more client advisers, retirement planners and stock brokers in the past year, even as turbulent markets prompted global banks to slash traders and investment bankers.

A JPMorgan spokesman declined to comment on the litigation costs or investment gain cited in the earnings announcement.

JPMorgan shares were down 6.7 percent to $30.98 in afternoon trading Thursday.

Assets under management across the division were little changed from a year earlier, slipping $3 billion to $1.25 trillion. The drop reflected withdrawals from money-market funds and stocks, offset by new money for fixed-income and alternative investments, such as hedge funds.

Total assets fell by 7 percent from the end of June, driven by a 17 percent drop in stock assets plus smaller withdrawals from alternatives and cash-equivalents.

Against that backdrop, JPMorgan expects fourth-quarter revenue across asset management to fall from an already weak third quarter, as shrinking asset values lead to lower management fees. Performance will not rebound next year unless markets recover, the bank said.

"This is a business that we would expect to see continued pressure on revenue in the fourth quarter if the current market conditions persist," Chief Financial Officer Douglas Braunstein said. "Long-term (investment) flows here also slowed materially this quarter."

Results were better at JPMorgan's three private banking businesses -- a private bank for the ultra rich, private wealth management for the rich, and the JPMorgan Securities brokerage. Revenue rose 10 percent to $1.3 billion and climbed 1 percent from the second quarter, reflecting hiring and other expansion efforts.

In private banking, client assets under management fell by 5 percent to $276 billion. Assets were little changed from a year earlier. JPMorgan is the world's 10th-largest wealth manager, according to private banking consultancy Scorpio Partnership.

Assets under supervision, which include those controlled by brokerage clients, under custody and deposits, increased by 6 percent from a year ago to $738 billion but were down 5 percent from the second quarter.

The brokerage, formerly known as Bear Stearns Private Client Services, added nine brokers and ended the quarter with 446 -- less than 3 percent of the salesforce employed by Bank of America Corp's Merrill Lynch.

(Reporting by Joe Giannone; Editing by Jennifer Merritt, Matthew Lewis and John Wallace)

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