After what was probably the worst quarter the financial sector will ever see, JPMorgan Chase (NYSE:JPM) has reason to smile. After all, it's still in business. It's scrambling to pick up fallen comrades like Bear Stearns and WaMu, which it's getting to buy for practically nothing. And, perhaps best of all, the government owns only a minority stake! (Yes, that's dripping with sarcasm.) Who ever said capitalism was dead?!

During the third quarter, JPMorgan booked $527 million in net income, or $0.11 per share, down almost 90% from the $0.97 per share earned in the same period last year. This quarter's results reflect a few tweaks to adjust for the recent acquisition of Washington Mutual -- strip those out, and the company would have lost $0.06 per share or so. All things considered, it was a pretty respectable quarter. Have a look at a few other numbers:

Metric

Q3 2008

Q3 2007

Revenue

$14.7 billion

$16.1 billion

Net Income

$527 million

$3.4 billion

EPS

$0.11

$0.97

Total Deposits

$970 billion

$678 billion

Net Charge-offs

0.22%

0.13%

Book Value Per Share

$36.95

$35.72

Tier 1 Capital Ratio

8.9%

8.4%

Everything looks pretty bland here, save for the total deposit numbers. Between the WaMu acquisition and being one of only a handful of banks left with a shred of reputation, JPMorgan is now the largest deposit-bearing bank in the country, leapfrogging the previous leader, Bank of America (NYSE:BAC). Why is that important? Because the financial-services sector is undergoing a paradigm shift from short-term debt funding to relying on stable customer deposits.

The last two independent investment banks -- Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) had to switch to bank holding companies a few weeks back after the old short-term-debt model went kaput, sending them into what could have been a quick death had the $700 billion bailout not calmed things down.

Now that short-term funding is becoming a thing of the past, he who holds the most deposits becomes the banking king -- in this case, JPMorgan. Add to it that it scored Bear Stearns' prestigious investment banking and prime brokerage for basically nothing, and it's not far-fetched to claim that JPMorgan is the only bank in a much, much stronger position today than it was a year ago.

Stronger, yes, but that doesn't mean things will be a cakewalk going forward. As CEO Jamie Dimon said this morning, "If you are not fearful, you're crazy." That sums it up pretty well: Several years from now, JPMorgan will be one of the top financial institutions in the world -- no doubt about that. The big question -- and a question few can answer confidently -- is what happens between now and then.

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