Tuesday, April 5, 2011

JPMorgan Chase & Co. (NYSE: JPM): Q1 Earnings Preview 2011

JP Morgan

JPMorgan Chase & Co. (NYSE: JPM), the second-biggest U.S. bank, is scheduled to release its first-quarter earnings before the opening bell on Wednesday, April 13, 2011. Analysts, on average, expect the company to report earnings of $1.17 per share on revenue of $25.73 billion. In the year ago period, the company reported earnings of 74 cents cents per share on revenue of $28.17 billion.

JPMorgan Chase & Co., a financial holding company, provides various financial services worldwide. JPMorgan Chase’s principal bank subsidiaries are JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.), a national banking association with United States branches in 23 states, and Chase Bank USA, National Association (Chase Bank USA, N.A.), a national banking association that is the Firm’s credit card-issuing bank. It operates in six segments: Investment Bank, Commercial Banking, Treasury & Securities Services, Asset Management, Retail Financial Services, and Card Services. J.P. Morgan is the first major U.S. bank to report first-quarter results.

In the preceding fourth quarter, the New York-based company's net income was $4.83 billion or $1.12 per share, compared with $3.28 billion or $0.74 per share last year.Total net revenue, on reported basis, grew 13% to $26.10 billion from $23.16 billion in the prior-year quarter. Total net revenue, on managed basis, was up 6% to $26.72 billion from $25.24 billion last year. Analysts, on average, expected the company to earn 99 cents a share on revenue of $24.54 billion. 

The company has benefited from continued credit improvement, return to positive loan growth and a recovery in mergers and acquisitions and other investment-banking businesses like underwriting equity and debt offerings. According to, JP Morgan was the top M&A adviser globally with deals worth $216bn under its belt for the quarter. 

The financial giant's plans to maintain its prime spot are concentrated on international growth. The bank wants to expand overseas and better link its commercial bank and payments businesses to the securities unit in order to sell more services to multinationals.

However, according to industry experts, first quarter results at big banks will likely be held back by weak trading and investment banking results. Average daily equity-trading volume on the largest U.S. exchanges fell 8.2 percent from the first quarter of 2010. Dollar volume of high-yield corporate bonds declined 13 percent from a year earlier, while volume of investment-grade bonds rose 8.8 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Last month, JPMorgan Chase & Co. declared a quarterly dividend of $0.25 per share, an increase of $0.20 per share. The dividend is payable on April 30, 2011 to stockholders of record at the close of business on April 6, 2011.The company also authorized a new $15 billion multi-year common stock repurchase program, of which up to $8 billion is approved for 2011. The share repurchase program replaces the prior $10 billion program that had approximately $3.2 billion of remaining authorization.Jamie Dimon chief executive officer said that the company expects to return to a payout ratio of around 30 percent of normalized earnings over time. "We expect, though at a minimum, essentially to repurchase the same amount of shares that we issue for employee stock-based incentive awards. Beyond this, we intend to repurchase stock only when we are generating capital in excess of what we need to fund our organic growth," Dimon added.

According to the Financial Times, JPMorgan Chase & Co. is in settlement talks with the SEC to end a probe into how the investment bank marketed a deal involving subprime mortgages in 2007. A settlement would resolve for JPMorgan one of the many regulatory headaches that have dogged Wall Street in the wake of the crisis. In its annual report, JPMorgan said outstanding legal proceedings could result in up to $4.5bn in “reasonably possible losses”. JPMorgan based its estimate “upon currently available information” and relied on “significant judgment”, given that many cases remained in their preliminary stages. The bank has said it is fully reserved for probable losses.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 8.30 and PEG Ratio (5 yr expected) of 1.29. In terms of stock performance, JP Morgan shares have gained nearly 9 percent since the beginning of the year.

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