GO
Loading...

JPMorgan Second-Quarter Profits Hurt by Home Equity Loans

Reuters
Wednesday, 18 Jul 2007 | 10:08 AM ET

JPMorgan Chase said Wednesday it tripled the amount it set aside for loan losses as home equity borrowers missed payments, hurting the bank's second-quarter net income growth.

The third-largest U.S. bank said net income was $4.2 billion, or $1.20 a share, compared with $3.5 billion, or 99 cents a share, in the year-earlier period.

JP Morgan Chase
JP Morgan Chase

That beat the average analysts' estimate of $1.08 a share, but the bank said it set aside $1.53 billion for loan losses, up from $493 million in the year-ago quarter. Much of that increase comes from higher loss estimates on home equity loans given to borrowers who put little money down.

JPMorgan shares slipped 72 cents to $49.20 in electronic trade before the market opening.

JPMorgan also said regional banking and auto finance were weak spots, as profits in those areas declined. The bank's retail finance division set aside $587 million for loan losses, up from $100 million in the year-earlier period, to reflect weak housing prices and the resulting increase in losses on home equity loans that had small down payments.

Home equity loans originated in the wholesale channel caused problems, the bank said. It has since tightened underwriting standards and raised prices to reflect elevated risk.

JPMorgan's overall net revenue rose 25% to $18.9 billion, better than the $17.53 billion expected by analysts.

Investment banking continued to be a bright spot as JPMorgan raked in fees from merger and acquisition advice.

Investment banking revenue surged 34% to $5.8 billion, up from $4.3 billion in the year-earlier quarter. The first quarter was better, though, at $6.3 billion.

The bank's retail financial services division, which includes home loans, credit cards and auto financing, reported $785 million in net income, down 10% from a year ago.

JPMorgan's asset management business saw profit soar 44% to $493 million as the unit took in more money from clients. The unit now has $1.1 trillion under management.

  Price   Change %Change
JPM MLP ETN
---

Featured

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video

  • CNBC's Jim Cramer explains why he is watching the oils, including Baker Hughes, Pioneer Natural Resources and EOG Resources.

  • In this clip from the March 10, 2009 edition of CNBC's Squawk on the Street, the late Mark Haines tells Erin Burnett, "I think we're at a bottom. I really do." As the credit crisis continued to swirl, the Dow had closed the day before at 6,547.05, a staggering 54 percent plunge from its all-time closing high above 14,000 in October of 2007. It was "going out on a limb" at the time, but has proved to be one of the best market calls ever heard on CNBC. March 9 turned out to be the bear market closing low. In the three years since Mark's call, the Dow has almost doubled.

  • CNBC's Rick Santelli and the traders on the floor of the CME Group express outrage over the notion they may have to pay their neighbor's mortgage, particularly if they bought far more house than they could actually afford, with Jason Roney, Sharmac Capita