JPMorganJPMorgan Chase (JPM) reported a second-quarter profit of $5.4 billion, or $1.27 per share this morning, up from $4.8 billion, or $1.09 per share a year ago.

When these numbers are released, I always like to dig into the earnings supplemental and find out exactly where that money came from. Broken out by segment, here's how it looked last quarter:


Chart

As in previous quarters, JPMorgan's investment bank carried the overall results. The skewing doesn't end there: Break down the results even further, and you'll see that fixed-income, currencies, and commodities trading makes up far more than half of the company's investment banking segment. This trading division likely represented more than one-fifth of the bank's total quarterly income.

Notoriously transitory -- here today, gone yesterday -- the market typically discounts these profits compared with other, more stable, lines of business. This might help explain why overall valuations look cheap. JPMorgan, like most Wall Street banks, is essentially a massive but marginally profitable bank, with a tiny yet amazingly profitable trading desk attached.

Where JPMorgan does lend money, things are looking up. Delinquencies in the bank's credit card division have dropped every quarter over the past year, with early-stage delinquencies down 40%. Non-performing assets in the retail financial unit have declined more than 10% in the past year.

Falling loan losses in the credit card division let JPMorgan release $1 billion (pre-tax) from loan-loss reserves this quarter, boosting earnings by $0.15 per share. The bank previously set aside this money to cover bad loans, but it's now bringing that cash back for shareholders' benefit. CEO Jamie Dimon has obsessively warned in the past that he doesn't consider this real net income, but it does reflect the bank's improving results.

JPMorgan remains the best of breed among large banks. However, this may only be a small triumph. The industry remains besieged with woe: Housing remains in decline; unemployment is still above 9%; rules outlining the future of trading and derivative markets are still largely unknown. Big banks look cheap, but in this environment, that may be where they belong.

Motley Fool contributor Morgan Housel doesn't own shares of any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of JPMorgan Chase.


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mmcdonald2k

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Michael McDonald

July 23 2011 at 12:13 AM Report abuse rate up rate down Reply
alucky1128f8@aol

ALL THESE COMPANIES DOING WELL NOW THAT TOOK OUR MONEY, LET THEM PAY THE DEBT DOWN !!!!!!!. START WITH OBAMA MOTORS !!!!!!. AND THE LIST GO'S ON !!!!!!!.

July 14 2011 at 11:22 PM Report abuse +1 rate up rate down Reply
alucky1128f8@aol

I'M BUYING A HOUSE RIGHT NOW, GREAT TIME TO GET ONE , BEFORE THE CHITT HITS THE FAN !!!!!!. THEN THEM CARDS WILL HIT THE FAN !!!!!!.

July 14 2011 at 11:19 PM Report abuse rate up rate down Reply
dterraman

look hard and you might see your money

July 14 2011 at 6:17 PM Report abuse rate up rate down Reply
jnburke7627

Sounds like J. Morgan Chase is doing something right. But to the detriment of whom?

July 14 2011 at 3:59 PM Report abuse rate up rate down Reply
toosmart4u

Have you lost your job yet? Do you buy foreign, vote republican, than you soon will be laid off.

July 14 2011 at 3:21 PM Report abuse rate up rate down Reply
1 reply to toosmart4u's comment
dterraman

just as easily vote demorat and lose it all too, they both want all you have

July 14 2011 at 6:18 PM Report abuse +2 rate up rate down Reply
thagrus

I have a chase redit card but never use it. I have found a better one.

July 14 2011 at 3:09 PM Report abuse rate up rate down Reply
thagrus

Dont you just luv a "business success story" we all had a part in.

July 14 2011 at 3:07 PM Report abuse +1 rate up rate down Reply
thagrus

Maybe they can help fund the army baracks that will be needed to house the defunct social security system recipents.

July 14 2011 at 3:05 PM Report abuse +1 rate up rate down Reply
KING BEAR

**** chase

July 14 2011 at 1:39 PM Report abuse +1 rate up rate down Reply