JPMorgan vs JPMorgan

12 April 2013 By Antony Currie, Agnes T. Crane Follow @AntonyMCurrie

The U.S. bank earned a record $6.5 bln in the first quarter, and almost matched Wells Fargo’s return on equity. And yet JPMorgan is still trading below book value. That lends weight to an argument by its own financial industry analyst that universal banks are “uninvestable.”

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JPMorgan on April 12 reported first-quarter net income of $6.5 billion, or $1.59 a share, beating the $1.39-a-share consensus estimate of analysts compiled by Thomson Reuters. Revenue was $25.1 billion, 4 percent lower than the same period last year and 6 percent higher than in fourth-quarter 2012. JPMorgan’s return on equity was 13 percent and return on tangible common equity was 17 percent.
Earnings were helped by the bank’s decision to set aside very little money to cover potential litigation costs, compared with $2.5 billion a year ago. JPMorgan also reported a $126 million pre-tax gain on the valuation of its own debt, compared with a $900 million loss in the first three months of 2012. Reserve releases were $1.15 billion compared to $1.8 billion in the same period last year. JPMorgan also benefited a year ago from a $1.1 billion pre-tax gain from a Washington Mutual bankruptcy settlement.
Separately, Wells Fargo on April 12 reported a record $5.2 billion of net income for the first quarter as lower provisions for loan losses and loan growth helped mitigate further compression of its net interest margins. The overall margin dropped by eight basis points in the first quarter to 3.48 percent. Revenue declined 1 percent year-over-year to $21.3 billion. Wells Fargo’s return on equity rose to 13.59 percent, up 1.45 percentage points from the same period in 2012.

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