July 15, 2013 / 1:52 PM / 4 years ago

Fitch: JPMorgan Chase 2Q'13 Results Aided by Reserve Releases

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(The following statement was released by the rating agency) NEW YORK, July 15 (Fitch) JPMorgan Chase & Co. reported solid second quarter 2013 (2Q'13) net income of $6.5 billion, although these results were aided by approximately $1.5 billion pretax ($930 million after-tax) of reserve releases. Revenues held up versus prior periods and came in at $25.9 billion, while the DVA gain was $355 million. Overall expenses remain controlled. Outside of the aforementioned DVA gain and reserve releases, results were fairly clean during the quarter. Fitch considers the $1.5 billion (pretax) reserve release to be large, albeit supported by improving asset quality in JPM's residential and credit card lending portfolios. The company expects further reserve releases over the coming quarters based on current asset quality run-rates. Although Fitch recognizes improving consumer asset quality measures which support lower provision levels, to the extent that improvements in home prices or employment reverse, further reserve releases may be less certain. As Fitch anticipated, residential mortgage banking showed signs of slowing during the quarter, as mortgage rates have begun to rise. Although mortgage applications were up 7% during the quarter to $65 billion, originations slowed during the quarter and were down 7% reflecting the rise in rates. Fitch expects that as rates rise, residential mortgage banking will taper off over the second half of 2013. The Corporate and Investment bank turned in better than expected results; 2Q'13 is typically weaker relative to the first quarter. Within the investment bank, investment banking fees showed strength, while FICC was down seasonally. JPM continues to hold top positions in key investment banking segments. Commercial Banking and Asset Management turned in stable performance during the quarter. Commercial banking loans outstanding were up 9% versus the prior year and deposits were flat. Similarly, Asset Management reported Assets Under Management (AUM) of $1.5 trillion based on solid net inflows. During the quarter, JPM continued to make progress on meeting Basel III capital and liquidity standards. The company reported Basel III Tier I Common of 9.3%, which is slightly below the 9.5% requirement, inclusive of the globally systemically important financial institution capital buffer. This also reflects AOCI losses incurred during the quarter due to the back-up in interest rates. Fitch considers compliance with potentially enhanced leverage ratios to be manageable, as JPM estimates holding company leverage is 4.7%, and bank leverage compliance could be achieved through management actions. Furthermore, JPM disclosed that its liquidity coverage ratio reached 118% based on its interpretation of the standard. On the back of this progress, JPM announced a dividend increase to $0.38/share. Contact: Joo-Yung Lee Managing Director +1-212-908-0560 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Christopher Wolfe Managing Director +1-212-908-0771 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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