Daily News: July 13, 2012

JPMorgan Reports Lower Q2 Earnings on $4.4B of Trading Losses

JPMorgan Chase reported second-quarter 2012 net income of $5 billion, compared with net income of $5.4 billion in the second quarter of 2011. Results included $4.4 billion of losses on CIO’s synthetic credit portfolio, $1 billion of securities gains in CIO and a $545 million gain on a Bear Stearns-related first-loss note, for which the firm now expects full recovery.

Earnings per share were $1.21, compared with $1.27 in the second quarter of 2011. Analysts polled by Thomson Financial had expected earnings per share of $0.76.

The decrease in earnings was driven by lower net revenue of $22.9 billion, down from $27.4 billion in the same quarter last year, largely offset by lower non-interest expense and a lower provision for credit losses. The bank notes that it reduced loan loss reserves by $2.1 billion, mostly for the mortgage and credit card portfolios.

Commenting on the losses on CIO’s synthetic credit portfolio, chief executive officer Jamie Dimon said, “Since the end of the first quarter, we have significantly reduced the total synthetic credit risk in CIO – whether measured by notional amounts, stress testing or other statistical methods. The reduction in risk has brought the portfolio to a scale that allowed us to transfer substantially all remaining synthetic credit positions to the Investment Bank. CIO will no longer trade a synthetic credit portfolio and will focus on its core mandate of conservatively investing excess deposits to earn a fair return. CIO’s $323 billion available-for-sale portfolio had $7.9 billion of net unrealized gains at the end of the quarter.”

To read the full earnings news release, click here.