JPMorgan net rises despite write-downs
NEW YORK (Reuters) - JPMorgan Chase & Co Inc (JPM.N) reported slightly higher quarterly profit on Wednesday as gains from private-equity investments helped offset $1.64 billion in write-downs on leveraged loans and collateralized debt obligations.
JPMorgan's performance is a vindication for Chairman and Chief Executive Jamie Dimon, who joined the bank after his career path was blocked at rival Citigroup (C.N). Profit at Citigroup plunged 57 percent in the third quarter amid calls for the ouster of CEO Chuck Prince.
"Jamie Dimon is a smart cookie," said Meg McMullen, chief of New England Research & Management, which oversees about $200 million but does not own JPMorgan shares. "He's ahead of the pack here."
But escalating losses on home equity loans are a problem being watched closely by analysts. The bank said it now expects quarterly losses of up to $270 million on home equity loans over the next several quarters. Its previous estimate was $150 million to $160 million per quarter.
Dimon blamed slumping home values and problems with loans where borrowers put little money down. To combat escalating delinquencies, the bank has tightened underwriting standards several times.
JPMorgan, the third-largest U.S. bank, said third-quarter net income was $3.4 billion, or 97 cents a share, up from $3.3 billion, or 92 cents a share, a year earlier.
The company's stock, down 4 percent this year, was up 95 cents, or 2.1 percent, to $46.06 in afternoon trade on the New York Stock Exchange.
Sandler O'Neill analyst Jeff Harte said enthusiasm for JPMorgan's performance may be muted because of the size of its gain from private equity investments. Analysts sometimes minimize such large contributions because they are not seen as a recurring event.
JPMorgan recorded gains of $766 million from private-equity investments, up from $226 million a year earlier. The bank's write-down on leveraged loans, used for corporate takeovers, was less than what some analysts had expected.
Private equity gains, along with profit growth in asset management and treasury services, helped beat analysts' average earnings forecast of 90 cents a share, according to Reuters Estimates.
JPMorgan's performance stands in sharp contrast to that of most other Wall Street firms, which saw profits plunge in the third quarter. Merrill Lynch & Co Inc MER.N expects to lose money in the quarter on $5.5 billion in write-downs.
JPMorgan's investment banking profit fell 70 percent in the quarter to $296 million, primarily because of markdowns of $1.3 billion, after fees, on leveraged lending commitments, and markdowns of $339 million on collateralized debt obligations.
The bank recently cut about 100 jobs in the investment banking division, and Dimon told the conference call there will be more trimming in hard-hit areas. But he said the bank will add jobs in growth areas.
(Reporting by Tim McLaughlin)
