JPMorgan Chase & Co. (NYSE:JPM): Q1 Earnings Preview 2010

JPMorgan Chase & Co., the second-largest US bank, is scheduled to release Q12010 earnings before the opening bell on Wednesday, April 14, 2010. Analysts, on average, expect the company to report earnings of $0.65 per share in the first quarter with estimates ranging from a low of $0.40 to a high of $0.74. Revenues for the quarter are estimated to be $26.58 billion. In the Q12009, JPMorgan Chase reported earnings of $0.40 per share on revenue of $26.92 billion.

JPMorgan has emerged as one of the strongest U.S. banks from the worst financial crisis in decades, thanks to its "fortress balance sheet." Led by CEO Jamie Dimon, the massive financial services company never posted a quarterly loss during the downturn.It operates in six segments: Investment Bank, Commercial Banking, Treasury & Securities Services, Asset Management, Retail Financial Services, and Card Services. Investment Bank segment provides investment banking products and services, including advising on corporate strategy and structure, capital raising in equity and debt markets, risk management, market-making in cash securities and derivative instruments, and prime brokerage and research.

In the preceding Q42009, the New York-based financial services giant reported that its net income surged to $3.28 billion or $0.74 per share, compared with $702 million or $0.06 per share, in the prior-year quarter. On a reported basis, JPMorgan's total quarterly net revenues were $23.16 billion, up 34% from $17.23 billion in the prior-year quarter. On a managed basis, total net revenues rose 32% to $25.24 billion from $19.11 billion in the previous year. Analysts, on average, expected the company to report earnings of $0.61 per share on revenue of $26.80 billion.

In an investor day presentation in February, Mike Cavanagh, Chief Financial Officer, noted that the company projects to increase its net income to $22 billion to $24 billion from fiscal 2009 net income of $11.7 billion. The projection is based on performance target and steady state assumptions, and most of the earnings growth are projected to be from Investment Banking , or IB, and Retail Financial Services, or RFS segments. Earnings growth is expected to result in significant capital generation, and excess capital provides flexibility for dividend increases, share buybacks, new investments & acquisitions, the company noted.

The company said it is positioned well for any environment, but execution against key challenges will be critical. The challenges it face include continued high levels of credit costs in 2010, economic conditions including high levels of uncertainty, legislative and regulatory changes for financial services, heightened competition from domestic and foreign banks and non-banks, as well as delivering against and beyond growth plans.

In his annual letter to shareholders released recently, CEO Jamie Dimon said the New York-based bank expects a $500 million to $750 million hit from the credit card reforms that took effect Feb. 22 prohibiting what he referred to as "certain practices that were not considered consumer-friendly."

JP Morgan edged out its closest Wall Street rival Goldman Sachs to the top of the equity capital markets rankings for the first quarter, with about $1.14 billion in revenue and a 7.8 percent market share, according to Dealogic’s data.

The financial firm has also reclaimed its throne as the largest hedge fund manager in the U.S. as the biggest hedge funds in the country nearly doubled their assets in 2009. JPMorgan Chase—which includes Highbridge Capital Management—now manages $50.4 billion, more than 50% more than at the beginning of last year, according to the biannual AR Billion Dollar Club survey.

Industry experts expect JP Morgan to be the first big firm to restore higher payouts to investors. CEO Jamie Dimon said in his annual letter to shareholders that the bank would like to boost its annual payout to a range of 75 cents to $1 from the current 20 cents.

In terms of stock performance, JP Morgan shares have gained nearly 25 percent since the beginning of the year.

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JPMorgan Chase & Co. (NYSE:JPM): Q4 Earnings Preview 2009

JPMorgan Chase (NYSE: JPM), the second largest U.S. bank by assets, is scheduled to release financial results for fourth quarter 2009 before the opening bell on Friday, January 15, 2010. Analysts, on average, expect the company to report earnings of 62 cents a share on revenue of $27.05 billion. In the year ago quarter, the company reported earnings of 7 cents per share on revenue of $17.23 billion.

JPMorgan has emerged as one of the strongest U.S. banks from the worst financial crisis in decades, thanks to its "fortress balance sheet." It operates in six segments: Investment Bank, Commercial Banking, Treasury & Securities Services, Asset Management, Retail Financial Services, and Card Services. Investment Bank segment provides investment banking products and services, including advising on corporate strategy and structure, capital raising in equity and debt markets, risk management, market-making in cash securities and derivative instruments, and prime brokerage and research. It took in $1.26 billion in advisory fees in the first nine months of the year, topping Goldman Sachs for the first time since 2000. The company has been able to rapidly increase its market share as it navigated the financial crisis without a quarterly loss.

The firm posted a sharp rise in third-quarter profit, helped mainly by strong results in its Investment Bank and Retail Banking businesses, which offset losses in Card Services and Consumer Lending segments. Net income surged to $3.59 billion or $0.82 per share, compared with $527 million or $0.09 per share last year. Income before extraordinary gain was $3.51 billion, compared with a loss of $54 million in the third quarter of 2008. Revenue jumped 81% to $26.62 billion from $14.74 billion. Analysts, On average, ehad projected earnings of $0.52 per share on revenue of $6.62 billion.

Thanks to strong capital generation in the third quarter, the bank has continued maintain a strong balance sheet, with a Tier 1 Capital ratio of 10.2% and a Tier 1 Common Capital ratio of 8.2%.

The New York-based company's Investment Banking business generated third-quarter net income of $1.9 billion, with its revenue rising 85% to $7.5 billion. Investment Banking fees increased 4% in the quarter to $1.7 billion, consisting of equity underwriting fees of $681 million, debt underwriting fees of $593 million and advisory fees of $384 million. Retail Banking net income jumped 44% to $1.0 billion from the same quarter last year.

JP Morgan said in October that credit costs remain high and are expected to stay high for the foreseeable future in the Consumer Lending and Card Services loan portfolios. The company's provision for credit losses for the third quarter was up 40% to $8.1 billion from $5.8 billion last year. However, last month, the bank said that there are some signs the rate of losses is settling and it may not need to build credit reserves much further.

Chairman and Chief Executive officer Jamie Dimon said in December that home equity losses could reach $1.4 billion per quarter over the next several quarters, quarterly prime mortgage losses could reach $600 million, and subprime mortgage losses could reach $500 million. Additionally, credit card losses in its Chase card portfolio would reach about 11% of such loans by the first quarter next year; losses from the portfolio JPMorgan Chase got from the purchase of Washington Mutual Inc. could reach about 24% over the next several quarters. He also added that loan demand remains weak, and that its net interest income from mortgage lending would fall $1 billion next year from what it estimates will be full year 2009 levels. The home mortgage portfolio could shrink 10% to 15% to about $240 billion in 2010 and to about $200 billion in 2011. That decline would reduce 2010 net interest income in the portfolio by about $1 billion from this year's levels.

The bank plans to hire 1,200 branch-based loan officers by end 2010 and to open more than 120 new retail branches in 2010. The company said that the 60% sales force increase is intended to help Chase customers buy and refinance homes, the bank said. The new positions will be spread across bank branches in 23 states including California, Florida and Texas, and in large metro areas like New York and Chicago. Also, in November, JPMorgan Chase agreed to buy Cazenove Group Limited's 49.99% stake in their joint venture J.P. Morgan Cazenove, a UK-based provider of investment banking and financial advisory services, for GBP 5.35 per share. The transaction is expected to complete in early 2010.

The bank could increase its dividend sometime in the early part of 2010, which now stands a 5 cents a share. In December, J.P. Morgan's CEO Jamie Dimon said that annual dividend could rise to between 75 cents and $1 in 2010 from 20 cents a share.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 13.79 and PEG ratio (5 yr expected) of 2.55. In terms of stock performance, JPMorgan shares have gained 47 percent over the past year.

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