Although profits fell 10% from a year ago, earnings still beat expectations. CEO Jamie Dimon said bank is strong but added that bank may boost credit reserves.
JPMorgan Chase reported a better-than-expected profit of $2.1 billion in the latest quarter, even as the bank aggressively set aside money to cope with rising loan losses, the company said Thursday.
The New York City-based bank said its net income for the first quarter was $2.1 billion, or 40 cents a share. Profits were down 10% from a year ago, but still handily beat expectations.
Analysts were anticipating JPMorgan Chase to record a profit of $1.38 billion, or 32 cents a share, for the quarter, according to Thomson Reuters.
Bolstering the bank's results were both its consumer and investment banking divisions, but JPMorgan Chase also logged $10 billion in credit costs during the quarter, which included a $4 billion addition to its loan loss reserves.
JPMorgan Chase CEO Jamie Dimon warned that this number could go higher if the recession intensifies, but added that he was comforted by his firm's robust capital levels.
"These levels of capital and reserves, combined with our significant pre-provision earnings power, enable us to withstand an even worse economic scenario than we face today," Dimon said in a statement.
As of the end of the quarter, Chase's Tier 1 capital ratio, a key measure of a bank's ability to absorb losses, stood at 11.3%. Not including the $25 billion that the Treasury Department injected into the firm in October, Chase's Tier 1 ratio was 9.2%. A Tier 1 ratio above 8% is generally considered healthy.
JPMorgan Chase is among a handful of banks that have hinted at their interest in repaying taxpayer funds, given the increasing restrictions imposed on banks participating in government rescue programs.
Goldman Sachs announced earlier this week that it would sell new stock to help pay back the government. But JPMorgan Chase did not give any further indications in its earnings release Thursday about when it might return funds to the Treasury.
Investment banking bounces back, cards take a hit
Delving deeper into the results, Chase's investment banking division came roaring back from a loss in the fourth quarter and posted a profit of $1.6 billion.
The strong investment banking performance was driven by a revenue surge in its fixed income division, which reported record results in some of its operations including trading and emerging markets.
The bank's retail financial services and commercial banking divisions helped contribute to the firm's overall profit for the quarter as well, but those gains were offset in other areas.
Chase's credit card division, for example, reported a net loss of $547 million, down from a profit of $609 million a year ago. The bank cited a sizable increase in allowances for loan losses and higher charge-offs, or loans the company doesn't think are collectable.
Despite facing such issues as rising credit costs, Dimon maintained that the bank was financially strong enough to weather the current downturn, and is well-positioned for an eventual recovery.
The bank also noted that it was making "excellent progress" with its late September purchase of failed Seattle-based lender Washington Mutual.
Chase has been working hard to integrate WaMu's assets, including its nationwide retail branch network. Chase said that it had total branches of just under 5,200 as of the end of the quarter, down from 5% from late last year as it consolidated some Chase and WaMu locations.
Chase's encouraging results come on the heels of impressive numbers put up in the last week by two of its biggest rivals - Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500).
Goldman Sachs reported a profit of $1.8 billion earlier this week -- which topped Wall Street estimates. San Francisco-based Wells Fargo said late last week it expected to book a record profit of $3 billion in the latest quarter, also higher than Wall Street's forecasts.
Following Chase's report, investors' eyes will now turn to two of the nation's most embattled banks - Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500). Citi and BofA are slated to report their first quarter numbers Friday and Monday respectively.
Shares of JPMorgan Chase (JPM, Fortune 500), which are up more than 50% from lows reached earlier this year, fell nearly 3% in pre-market trading.
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