JPMorgan profit beats estimates on investment banking gains

Tim Catts

Jul 16th 2009 at 8:00AM

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Not to be outdone by Wall Street rival Goldman Sachs (GS), JPMorgan Chase (JPM) said revenues set a record in the second quarter and profit surged 36 percent, eclipsing analysts' estimates.

Powered by huge gains in its investment bank, JPMorgan posted profits of $2.7 billion, or 28 cents a share, compared with $2 billion a year ago. Analysts had been expecting net income of 5 cents a share. Earnings would have been 27 cents a share higher if not for the cost of repaying the $25 billion investment it received from the government's financial rescue program.

JPMorgan has risen to the top of Wall Street's league tables for equity and debt underwriting and merger advice, bolstering its income in the quarter. Profit from those businesses, and from its trading desk, rose a whopping 273 percent, to nearly $1.5 billion, the company said.

As with Goldman Sachs, it appears fixed-income trading contributed mightily to JPMorgan's results, adding $4.9 billion to revenues, a 110 percent increase from a year ago. And like Goldman Sachs, JPMorgan significantly boosted the risks it took to achieve those results. Its value at risk surged. The figure, designed to measure how much a firm's traders stood to lose in a single day, surged 79 percent to $267 million.

Other divisions didn't fare so well. JPMorgan reported profit from its retail banking operation nearly disappeared, falling 97 percent, while its credit cards business swung to a $672 million loss, compared with earnings of $250 million a year ago.