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Everything You Need to Know About the JPMorgan Earnings Report

By David Hanson - Apr 12, 2013 at 4:12PM

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The largest bank in the U.S. reported massive earnings on Friday morning.

Amid the Congressional hearings and sideshows calling for Jamie Dimon to relinquish his title of chairman or even completely step down, JPMorgan Chase (JPM -0.82%) still managed to rake in a $6.5 billion first-quarter profit. Despite the record results, investors weren't overwhelmed with joy as demand for loans remained tepid and mortgage banking revenue declined from fourth-quarter levels.

Here at the Fool, we try not to let earnings from one quarter cloud our judgment about the overall position of the company, but we can learn about the company's strategy and outlook for the future. While its reputation is slowly recovering from the London Whale trading fiasco, JPMorgan's investment banking and asset management segments remain its crown jewels and have positioned the company to weather the low rate and low loan demand environment.

3 reasons to love JPMorgan's earnings
While the market wasn't enamored with the company's earnings release, there are some things to love about the bank's current position.

1. The profit engine: The bank's quarterly profit was up a massive 33% from the same quarter in the previous year. Most of the improvement was driven by lower expenses.

2. Rising returns: The megabank posted an impressive 13% return on equity, slightly better than rival Wells Fargo.

3. Jamie's fortress: Dimon is famous for his desire to boast a "fortress balance sheet." The bank reported a 10.2% Basel I Tier 1 common capital ratio.

To learn more about these strength areas, click here to read John Grgurich's full analysis.

3 reasons to hate JPMorgan's earnings
Despite the record earnings, it's not all smiles for Dimon and JPMorgan.

1. Soft revenue: As expected, JPMorgan's mortgage banking income dropped as gain-on-sale profit margins were squeezed.

2. NIM compression: The bank's net interest margin crept lower as the lower interest rate environment resulted in fewer investment opportunities as deposits grew.

3. Share buybacks: Despite being touted as shareholder-friendly, JPMorgan's buyback program isn't really doing much more than offsetting share grants to executives.

To learn more about these potential weaknesses, click here to read John Maxfield's full analysis.

All ears on Jamie
Famous for his sharp and straight-forward tone, Dimon was his normal self on the company's conference call. When asked about too-big-to-fail banks, Dimon took a shot at justifying his company's size by pointing out the fact that they provide unparalleled value:

There's a reason our numbers are good because we have cross-selling clients come to us. And there's a reason for global banks just as there are reasons for community banks. I think that the real issue, again, and you guys do the numbers is, the banking system has gotten so much stronger in the United States.

Jamie Dimon

To read more key quotes from Dimon and JPMorgan's CFO from Friday's earnings call, click here.

Foolish conclusion
Although the company certainly faces headwinds in the form on a slow-growing economy and additional regulation, Foolish investors have many reasons to be optimistic. JPMorgan's profit engine is firing on all cylinders, but the true measure of success for the company will be its ability to prove to regulators that it's serious about compliance and cooperating in the new environment. Despite the recent calls for his head, Dimon seems focused on returning his firm to a spot atop the list of the world's most respected banks. 

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