Earnings Cheat Sheet: JP Morgan Shows Some Pain on Wall Street

One of the country’s once most revered institutions reported third-quarter earnings today and, despite a beat on earnings,  showed us some pain on Wall Street.

The company was the focus of negative attention during the Wall Street bailout as well as the fallout from its bargain basement buy of Bear Stearns with special financing from the Fed, to the tune of $55B. The bank has since repaid its share of federal bailout money.

JP Morgan merged with Chase Manhattan Bank in 2000, Bank One in 2004, and acquired failing Washington Mutual in 2008. These banks were formed from other legacy institutions such as Chemical Bank, Manufacturers Hanover, First Chicago, and National Bank of Detroit.

Here’s your Earnings Cheat Sheet for JPM’s third-quarter earnings (non-GAAP):

Earnings: Up 23 percent (yoy) to $1.01 from $0.82

Revenues: Net revenues @ over $24B, 15 percent lower than same quarter in 2009 but 23 percent higher in net income

Actual vs. Expected: $1.01 vs. expectations of $0.90

Notable Stats: Retail Financial Services remains the largest source of revenue, but net revenues came in 7 percent lower yoy. Net revenues for investing banking came in at $5.35B, but this is 29 percent lower than same quarter in 2009 and 15 percent lower than last quarter. Within this category, equity underwriting fees went down 51 percent yoy, but debt underwriting fees were up 32 percent.

Core Product Highlights:

-Investment banking: net income 33 percent lower than 3Q2009 and 7 percent lower than 2Q2010. Top ranking by volume in the year to date in Global Investment Banking Fees (#1) ; Global Debt, Equity and Equity-related (#1); Global Equity and Equity-related  (#1); Global Long-Term Debt (#1); Global Announced M&A (#2);  and Global Syndicated Loans (#2)

-Retail Financial Services (consumer loans and deposits): net income down 12 percent

-Card Services (credit cards) Net income was $735 million, compared with a net loss of $700 million in the prior year

-Commercial banking: Net income was $471 million, an increase of $130 million, or 38%, from the prior year.

Key Quotes:

The positive spin from CEO Jamie Dimon is all about clients and employment, which is a good thing with the mood of the country such as it is.

“We are firmly committed to doing all we can to support the ongoing economic recovery… So far this year, we have loaned or raised capital for our clients of more than $1.0 trillion, and our small-business originations were up 37%. In addition, we are on track to hire over 10,000 people in the U.S. this year.”

The negative focus of his comments remains on an overall weak economy, which could threaten future performance going forward:

“…our mortgage and credit card portfolios continued to bear very high net charge-offs. …If economic conditions worsen, mortgage credit losses could trend higher. ..We expect credit card net charge-offs to continue to improve next quarter.”

Competitors: Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS) and Bank of America (BAC)

Technicals: The stock continues to drop in active trading after the earnings report. Despite a recent upswing in share price, the stock is nearing resistance at $41.70.  MACD could complete the turn and signal a buying a opportunity, but with the stock overbought, a weakening economy, and a forward PE of 1.36, chances are a fall in price is more likely despite the market upturn of late.

Disclosure: No positions in JPM