JPMorgan Results Bode Ill for Quarter at Regional Banks.

American Banker

By Matthew Monks
July 17, 2009

JPMorgan Chase & Co.'s better-than-expected quarterly results said a lot about the country's second-largest banking company, but even more about everybody else.

Specifically, the details underscored the advantages held by the very largest players, and the challenges ahead for midsize firms, as they all try to claw their way out of the financial crisis.

That was the take-away of numerous industry watchers after studying JPMorgan Chase's 36% leap in second-quarter profits. The New York company's blueprint for profitability — surging trading and fixed-income gains offsetting mounting credit card, business and mortgage loans losses — could set the tone of what to expect this earnings season from the large banking companies that have sizable capital markets outfits.

The results could also be a sign, though, of poor numbers to come from regional banks that have similar credit problems but do not have muscular investment banking divisions.

"You'll see strength from other banks — Bank of America, Citi — in the capital markets arena," said Keith B. Davis, an analyst with Farr, Miller & Washington, an investment management company in Washington. "The ones that don't have capital markets businesses are going to be even more exposed to credit costs — consumer, but also commercial real estate, where a lot of the regional banks are more focused."

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Others were less impressed.

Richard Bove, the outspoken Rochdale Securities LLC analyst, described the optimistic outlook as "unusual" given how JPMorgan Chase usually has a "very sober outlook for the future."

"The reality is that this was a very bad quarter for JPMorgan Chase. Loans and deposits fell with deposits falling faster than loans. Nonperforming assets continue to rise," Bove wrote in a research note. "Capital gains are the reason for the strong revenue and earnings performance and these are not sustainable."

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I chose to take advantage of low interest rates offered to me on my Chase card (2.99% and 4.99%). I did some home improvements with the money. I paid on time and always above the minimum due. They now inform me that my minimum payment will be raise 150%. They do not want people having loans of 2.99 and 4.99 so they raise the minimum payment so high it puts the loan in jeopardy. Business as usual for Chase.