JPMorgan Chase & Co's robust $3.6 billion quarterly profit could prove a tough act for rivals to follow as its investment bank capitalized on the disappearance of some rivals and the weakness of others. The second largest US bank by assets, and largest by market capitalization, reported much-better-than-expected results as bond trading revenue surged and it benefited from last year's purchases of Bear Stearns and Washington Mutual.
The results, which boosted the bank's shares 3.3% to a 52-week high, cement JPMorgan's position as one of the few banks that has emerged stronger from last year's Wall Street meltdown.
“They've come through the crisis impeccably well,” said Bill Fitzpatrick, analyst at Optique Capital Management.
Rivals Citigroup Inc and Bank of America Corp, which report on Thursday and Friday respectively, already lag JPMorgan's investment bank - which is ranked number one in global league tables for debt and equity underwriting.
That unit reported net income of $1.9 billion, up from $882 million a year earlier, and made up the lion's share of JPMorgan's 580% increase in earnings.
JPMorgan's earnings were not uniformly positive.
As expected, losses on loans still rose and net charge-offs on consumer loans climbed to $7 billion. But Citi and Bank of America may get even harder hit by such losses.
Bank of America and Citi - the largest and third largest banks respectively - also labor under $45 billion in bank bailout funds that tie them to compensation restrictions and hobble their ability to compete.
Year to date, JPMorgan shares have climbed 50% and Bank of America shares are up 32%. Citi shares have fallen 26%.
In fact, former investment bank Goldman Sachs Group Inc, which reports its results on Thursday, is the firm most likely to rival JPMorgan's performance. Goldman's shares have more than doubled this year.
“The higher quality companies like JPMorgan and Goldman Sachs have been able to take market share away and I think that trend will continue,” said Robert Lutts, chief investment officer at Cabot Money Management.
While both are clearly picking up client business, it is unclear whether they can maintain high profits from trading. Both reported a record first half from their investment bank divisions and JPMorgan's fixed income division delivered an eye-popping $5 billion in revenue in the third quarter - JPMorgan executives warned that this is not sustainable.
JPMorgan as a whole posted third-quarter net income of 82 cents a share, compared with 9 cents in the same quarter last year and soundly beat analysts' forecast of 52 cents a share, according to Thomson Reuters I/B/E/S. (Reuters)