JPMorgan Chase Gets It Done

Knowing all too well that today's financial markets are cloaked in paranoia, investors haven't been asking "What have you done for me today?" The prime issue facing banks today is "Are you going to be here tomorrow?"

So while JPMorgan Chase (NYSE: JPM  ) reported quarterly net income that plunged from the same period last year, investors are wise to shrug it off and realize the bank is one of the lucky ones to still be a twinkle in Wall Street's eyes.

Second-quarter net income came in at $2 billion, or $0.54 per share, down 55% from the $1.20 per share earned in the same period last year. The results were nipped by the integration of Bear Stearns, which lopped off about $500 million from the bottom line. Revenue slid 3% to $18.4 billion, but easily trounced expectations of $16.55 billion. Credit-loss provisions swelled $1.3 billion, while the firm's investment banking unit took just over $1 billion in write-offs related to leveraged lending and mortgage products. Tier 1 capital -- one of the strongest indicators of a bank's health these days -- increased to $98.7 billion, or 9.1%.

For real?
JPMorgan logged a surge in mortgage banking profits for the quarter, coming in at $169 million, or 138% ahead of the prior year, while mortgage loan origination climbed 27% from the year before. What's it doing moving into such a soured segment right now? The mortgage mayhem over the past year has made the market ripe for the picking for banks -- like JPMorgan -- with enough fortitude to jump in the middle of the chaos. Earlier this year, the bank made an offer to acquire Washington Mutual (NYSE: WM  ) , which would have ballooned JPMorgan's mortgage exposure, but that deal was turned down (by WaMu management who are no doubt kicking themselves now). Late last month, rumors flew that JPMorgan might be making a run for Wachovia (NYSE: WB  ) , another mortgage heavyweight, but the gossip quickly faded.

What this mean for the market?
There are three main banks that are staying one step ahead of the tattered financial sector: Goldman Sachs (NYSE: GS  ) , Wells Fargo (NYSE: WFC  ) , and JPMorgan. The three banks have two things on their side that are worth their weight in gold right now: they didn't get in over their head with boneheaded lending practices, and (because of that) they've gained the trust and admiration of customers, counterparties, and investors -- a privilege that is second-to-none in surviving the credit crisis.

Sure, there's a mountain of challenges ahead of the entire banking industry, but the three amigos mentioned are some of the only banks that will not only outshine their peers, but can actually swoop in and capitalize on other banks' problems. The adoption of Bear Stearns at an insanely low price is a great example of JPMorgan being able to create a treasure out of someone else's trash.

Will there be more bottom fishing? For hungry shoppers like JPMorgan, acquisitions of troubled peers will provide the blueprint of what's to come of this never-ending financial soap opera.

Until then, check out:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. JPMorgan Chase is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 687933, ~/Articles/ArticleHandler.aspx, 10/24/2016 8:31:55 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
JPM $68.49 Down +0.00 +0.00%
JPMorgan Chase CAPS Rating: ****
GS $174.67 Down +0.00 +0.00%
Goldman Sachs CAPS Rating: ***
WAMUQ.DL $0.00 Down +0.00 +0.00%
Washington Mutual,… CAPS Rating: No stars
WB.DL2 $5.54 Down +0.00 +0.00%
Wachovia Corp CAPS Rating: **
WFC $45.09 Down +0.00 +0.00%
Wells Fargo CAPS Rating: ****