JPMorgan profit rises 47 percent, beating estimates

Bilibala: I haven't read through JP Morgan's financial release yet, but improvement in bank performance to me is kind of expected, that's why the stock price do not have a big jump after the news.

With QE2.0 the issue is not lack of cash, but too many funding with no where to invest: T-bill earning almost zero? lead out to ppl who are not credit worthy? invest in commodities? or what?

http://www.reuters.com/article/idUSTRE70D2BM20110114?feedType=nl&feedName=usbusinessearly

(Reuters) - JPMorgan Chase & Co reported a 47 percent increase in quarterly earnings, but much of the gain came from dipping into money previously set aside to cover bad loans.
The gradually recovering U.S. economy is allowing JPMorgan to keep less money on hand for loan losses. Profit and revenue was stronger than analysts had expected, and the bank made more loans.

But JPMorgan is still wrestling with the aftermath of the mortgage crisis -- it set aside another $1.5 billion to cover legal settlements mainly linked to U.S. home loan foreclosures.

"Hopefully it's going to be a good year," said JPMorgan Chief Executive Jamie Dimon on a conference call with journalists, adding that the economy looks better now than it did 12 months ago.

JPMorgan shares rose 10 cents to $44.55 in early trading on the New York Stock Exchange.
Analysts said the results could indicate headwinds for major banks reporting next week. The largest U.S. bank, Bank of America Corp, reports on Friday January 19, while Citigroup, the third largest, reports on Tuesday. Goldman Sachs Group reports on Wednesday.

JPMorgan said profit increased to $4.8 billion, or $1.12 a share, from $3.3 billion, or 74 cents a share, a year earlier. Analysts on average expected $1 a share, according to Thomson Reuters I/B/E/S.

Fewer bad loans meant the bank could reduce loan-loss reserves for its credit card unit by $2 billion, or 30 cents a share after tax.

"The loan-loss reserves are something that bugs me," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor. "I would love to see a bank hit their numbers without taking from loan-loss reserves for once," he added.

Revenue rose 6 percent to $26.7 billion on a managed basis, which adjusts for an accounting change for off-balance sheet entities. That was higher than the $24.37 billion expected by analysts.

HIGHER INVESTMENT BANKING REVENUE
In JPMorgan's investment bank, revenue rose 26 percent to $6.21 billion. Compensation expense per employee for the full year, a measure of how investment banking bonuses will fare, dropped 2.7 percent to $369,651.

Merger advisory revenue fell 31 percent from the fourth quarter 2009 to $424 million, but Chief Financial Officer Douglas Braunstein said revenue in this area should rise in 2011 because of the large number of deals in the pipeline.

Fixed-income trading revenue, at $2.88 billion, was 5 percent higher than the fourth quarter of 2009 but down 8 percent from the third quarter of 2010.

Some analysts expect Goldman Sachs and Morgan Stanley to post 10 percent to 15 percent declines in fixed income trading revenue, so JPMorgan's results could mean the business is not as bad as feared.

The bank benefited from a turnaround in its retail banking unit, which reported a profit of $708 million compared with a loss of $399 million in the year-earlier quarter.

Still, JPMorgan had to put aside $1.5 billion of additional litigation reserves related to soured mortgages it sold to investors and homes it may have improperly foreclosed on.

Bank of America Corp last week agreed to pay $2.8 billion to mortgage finance giants Fannie Mae and Freddie Mac to settle claims that it sold bad home loans to them.

Many investors fear that other banks will have to make similar settlement with the two government-backed entities.

(Additional reporting by Maria Aspan in New York and Dominic Lau in London; Editing by Lisa Von Ahn and Steve Orlofsky)