2011 Q1 Earnings: JPMorgan Profits Surge 67%; Asset Management AUM Up 9%

Profits rise despite lower revenues as JPM sets aside less for bad loans

JPMorgan Chase kicked off first-quarter 2011 earnings season on Wednesday by reporting a 67% rise in profits, with earnings at $5.56 billion, or $1.28 per share, versus $3.3 billion, or EPS of $0.74, a year ago at this time. The earnings performance beat analysts’ expectations for EPS of $1.15.

The bank’s strong performance comes as it continues to work out provisions for bad mortgages and credit card loans. JPMorgan set aside $1.17 billion in the first quarter compared with $7.01 billion a year ago, but its retail division reported a net loss of $208 million, compared with a net loss of $131 million in the prior year, according to the company’s Q1 2011 earnings release.

The retail bank’s performance “was more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues,” said Chairman and CEO Jamie Dimon in a statement. “Unfortunately, these losses will continue for a while. Rest assured, we are fully engaged in fixing our problems and addressing our mistakes from the past, and we will strive to build the best mortgage business going forward."

However, he said, JPMorgan’s strong balance sheet allowed the bank to increase its annual dividend to $1.00 per share and to re-establish a significant share-repurchase program.

The bank increased its quarterly common stock dividend to $0.25 per share and authorized a new $15 billion multi-year common stock repurchase program, of which up to $8.0 billion of common stock repurchases is approved for 2011.

In JPMorgan’s asset management division, net income was $466 million, an increase of $74 million, or 19%, from the prior year. The results reflected higher net revenue and a lower provision for credit losses, largely offset by higher noninterest expense.

Net revenue was $2.4 billion, an increase of $275 million, or 13%, from the prior year. Noninterest revenue was $2.0 billion, up by $246 million, or 14%, due to the effect of higher market levels, net inflows to products with higher margins and higher loan originations, partially offset by lower performance fees. Net interest income was $386 million, up by $29 million, or 8%, due to higher deposit and loan balances, partially offset by narrower deposit spreads.

Revenue from Private Banking was $1.3 billion, up 15% from the prior year. Revenue from Institutional was $549 million, up 1%. Revenue from Retail was $540 million, up 24%.  

Assets under supervision were $1.9 trillion, an increase of $201 billion, or 12%, from the prior year. Assets under management were $1.3 trillion, an increase of $111 billion, or 9%. Both increases were due to the effect of higher market levels and record net inflows to long-term products, partially offset by net outflows in liquidity products. Custody, brokerage, administration and deposit balances were $578 billion, up by $90 billion, or 18%, due to the effect of higher market levels and custody and brokerage inflows.

The provision for credit losses was $5 million, compared with $35 million in the prior year. Noninterest expense was $1.7 billion, an increase of $218 million, or 15%, from the prior year, largely resulting from an increase in headcount.

Click here for AdvisorOne’s 2011 Q1 Earnings Calendar for the Financial Sector.

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