JPMorgan Chase had impressive earnings for the quarter and is on track to continue those results in the quarters to come, according to CFO Michael Cavanagh.
JPMorgan said record investment banking fees helped drive a 36 percent rise in quarterly profit, topping Wall Street forecasts. The bank earned $2.72 billion, up from $2 billion a year earlier. Revenues soared 39 percent to $25.62 billion.
"Obviously, against a tough economic backdrop, which we have been having, we have got to be pleased with those results," Cavanagh said.
"Both of those numbers are records for the quarter and the year. Obviously very strong results in the investment bank," Cavanagh said. "But it wasn't just the investment bank. It was continued strong profits, commercial bank, treasury services, asset management and retail banking, the branch side, helped by the [Washington Mutual] acquisition versus a year ago."
Though non-performing loans were more than analysts expected while additions to loan-loss reserves were a bit less than expected, Cavanagh said they were in line with the company's expectations, plus the company focuses more on future expected actual losses.
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"We talk a lot about that and are very early to add to reserves," he said. "Two years ago we had about $7 billion of loan loss reserves which cover you for these increases in losses — now they're at $30 billion.
"The fact that we've made money every quarter through this crisis, while building up that kind of reserve position together with $122 billion in tier-one capital ... all that factors in our views and expectations on future credit trends."
The Economy Ahead
"We have seen ... some signs that maybe we're getting close to being done with loan loss additions," he said.
Those signs are particularly on the consumer side — specifically mortgages — where the company has been surprised according to Cavanagh by how severe the losses have been progressing over the last two years.
"For the first time in this crisis, we've seen what we call 'early bucket delinquencies' — this is people going late the first payment or the second payment stabilized over the last 60, 90 days both in terms of numbers and dollars," Cavanagh said. "If that trend continues, that's a very good sign and we could be getting to the point where we're almost done on adding to reserves."
Cavanagh also said that unemployment wil trend higher in the second half of the year but will likely reach its peak at the year's end.
JPMorgan's Exposure to CIT
Cavanagh also said that JPMorgan Chase has no counter-party risk and no material exposure to CIT Group, which is struggling to avoid Chapter 11 and is seeking secured financing.
"[There is] nothing that I would expect to create any material issues for us no matter what the outcome there," Cavanagh said.
Cavanagh also discussed commercial real estate and how the Bear Stearns/WaMu integration is progressing. Watch the video for complete details.