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Wednesday, April 13, 2011

JPMorgan Reports Strong Q1 Earnings (Financial Charts, Review) *EPS $1.28* JPM

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JPMorgan Chase reported Q1 2011 financial results on Wednesday, April 13
* Charts and commentary have been updated for JPMorgan Q1 March 2011 financial results *


JPMorgan Chase & Co. Reports Strong Q1 2011 Financial Results

JPMorgan Summary Q1 2011 JP Morgan's Q1 2011 financial results overall were strong, even with a $1.75 billion expense for ongoing mortgage and foreclosure issues. This charge was offset by a $1.874 billion decrease in provision for credit losses. JPMorgan has definitely rebounded from the depths of the Great Recession and USA Financial System Crisis in 2008 and 2009.

JPMorgan Income Statement Q1 2011 Financial performance continues an improving trend. Q1 2011 was $25.2B net revenues, $5.4B net income, and $1.28 earnings per share. For QoQ, net revenues were down -3.36%, net income was up +10.85%, and earnings per share were up +14.29% from the prior quarter Q4 2010. For YoY, net revenues were down -8.85%, net income was up an impressive +61.00%, and earnings per share were up an amazing +72.97% from prior year Q1 2010. Net income has been above $4 billion and earnings per share above $1.00 for the last 4 quarters, maintaining an overall  improvement since the dismal performance of Q3 and Q4 of 2008 at the lows of the USA Financial System Crisis. Both the operating margin of 31.15% and net margin of 21.23% increased QoQ and YoY and are at multi-year if not all-time highs. Both are well above the Great Recession lows.

JPMorgan Balance Sheet Q1 2011 JPMorgan's "fortress balance sheet" of $2.198 trillion in total assets maintains a reasonable capital ratio of 8.22% and an adequate Tier 1 Capital (estimated) and Tier 1 Common (estimated) ratios of 12.3% and 10.0%, respectively. Total assets were up QoQ +3.80%.


JPMorgan Financial Performance by the Quarters (Charts)

JPMorgan Earnings Per Share (Chart) Below is a chart of quarterly earnings per diluted share. The EPS dipped during the Global Recession and USA Financial System Crisis but has improved for 2 consecutive quarters and has remained above $1.00 for 4 consecutive quarters. The Post-Great Recession peak has been the current $1.28.


JPMorgan Net Revenues, Operating Income, and Net Income (Chart) Below is a chart of quarterly net revenues, operating income, and net income. Because JPMorgan is a huge, complex financial organization with several divisions, consolidated revenues are reported net of interest expense. Therefore, there is no gross profit and margin compared to companies in other industries or sectors. Net revenues peaked in March 2010 ($27.671B) and have yet to be regained. Current operating income of $7.857B is at an all-time high. Current net income of $5.355B is at an all-time high.


JPMorgan Operating Margin, Net Margin, and Capital to Assets Ratio (Chart) Below is a chart of quarterly operating margin, net margin, and the capital to assets ratio. The current operating margin of 31.15% is excellent and a Post-Great Recession high. The current net margin of 21.23% is outstanding and a Post-Great Recession high. The capital to assets ratio is stockholders' equity to total assets ratio, not the Tier 1 capital or common ratio. Tier 1 ratios are financial regulatory ratios and generally higher than the capital to assets ratio. JPMorgan's latest quarterly capital to assets ratio is reasonable at 8.22%. The December regulatory Tier 1 and Tier 1 capital and common ratios are 12.3% and 10.0%, respectively, which is adequate.


JPMorgan Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. The ROA dipped during the Global Recession but has significantly rebounded. The ROA has improved an impressive 8 consecutive quarters. Although JPMorgan is a huge, complex financial organization with $2+ trillion in total assets, a 1.00% ROA is a banking benchmark that has not quite been reached.


JPMorgan Income Statement Components (Chart) Below is a chart of major income statement components: NonInterest Revenue, Net Interest Income, Provision for Credit Losses, NonInterest Expense, and Net Income. NonInterest Revenue dipped but continues above $13B. Net Interest Income has decreased 4 consecutive quarters. Provision for Credit Losses is at a Post-Great Recession and multi-year low which indicates bad loans have been worked off the loan portfolio. NonInterest Expense, operating expenses, have increased dramatically and are almost double compared to March 2008. Net Income is now at a Post-Great Recession and multi-year high.


JPMorgan Growth Rates (Chart) Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for net revenues and earnings per share. Net revenues and earnings  per share have been surprisingly volatile for such a huge financial company ($2+ trillion in total assets). As the USA financial  system and economy stabilize, the growth rates would be expected to also stabilize for net revenues and earnings per share. JPMorgan financial performance has continued to improve from the lows of the Great Recession. The chart below covers only some recent quarters through the latest quarter reported. The rapid plunge in net revenues and earnings per share and the subsequent impressive rebound as a result of the Great Recession and subsequent recovery resulted in some extreme percentages that obscure recent data.


JPMorgan Operating Expense Ratio (Chart) This is a negative trend of an increasing operating expense ratio (NonInterest Expense divided by Total Revenues which are NonInterest Income and Interest Income). An increasing share of each dollar of revenues is being spent on operating expenses. Ultimately a continuation of this trend will affect profitability and already has. The current operating expense ratio has exceeded 55% and the ratio has been above 50% for 5 consecutive quarters.



JPMORGAN CHASE REPORTS FIRST-QUARTER 2011 NET INCOME OF $5.6 BILLION, OR $1.28 PER SHARE, ON REVENUE OF $25.8 BILLION

New York, April 13, 2011 – JPMorgan Chase & Co. (NYSE: JPM) today reported first-quarter 2011 net income of $5.6 billion, compared with net income of $3.3 billion in the first quarter of 2010. Earnings per share were $1.28, compared with $0.74 in the first quarter of 2010.

Jamie Dimon, Chairman and Chief Executive Officer, commented on the quarter: “The Firm’s results reflected a strong quarter across the Investment Bank and solid performance from Card Services, Commercial Banking, Treasury & Securities Services, and Asset Management. These results partially benefited from improved credit trends in our credit card and wholesale businesses.”

Dimon continued: “Retail Financial Services demonstrated good underlying performance, while we continued to invest in building branches and adding to our sales force. However, this performance was more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues.(a) Unfortunately, these losses will continue for a while. Rest assured, we are fully engaged in fixing our problems and addressing our mistakes from the past, and we will strive to build the best mortgage business going forward.”

Commenting on the balance sheet, Dimon said: “We strengthened our fortress balance sheet, ending the first quarter with a strong Tier 1 Common ratio of 10.0%. Looking forward, we intend to operate the business with the objectives of maintaining a Basel I Tier 1 Common ratio of at least 9.0% and meeting the Basel III requirements substantially ahead of time. Our earnings power will allow us to generate significant capital in excess of our objectives, enabling us to invest aggressively in our future."


About JPMorgan Chase & Co.

JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.2 trillion and operations in more than 60 countries. The Firm is a leader in investment banking, financial services for consumers, small-business and commercial banking, financial transaction processing, asset management and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at http://www.jpmorganchase.com/.


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