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JPMorgan Chase earns $5.4 billion in 2Q

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JPMorgan Chase & Co. (JPM) posted a second-quarter profit of $5.4 billion, or $1.27 a share, as the banking giant continues to record charge-offs from its mortgage portfolio. That profit is up from income of $4.8 billion, or $1.09 per share, from last year. Revenue rose 7% from a year earlier to $27.4 billion led by gains in investment banking. "With respect to our mortgage portfolio, delinquency and net charge-off trends improved modestly compared with the prior quarter, however, net charge-offs remained high, and we expect credit losses to remain elevated," said Chairman and CEO Jamie Dimon. For the three months ended June 30, the company wrote down $1 billion in pretax charges to cover the estimated costs from foreclosure-related matters and another $1.3 billion to cover litigation reserves for mostly mortgage-related concerns. Dimon said in a statement the bank has been working hard to fix problems in its mortgage portfolio, but added "it will take some time to resolve these issues and it is possible we will occur additional costs along the way." JPMorgan expects quarterly charge-offs of about $1.2 billion from its home lending operations and repurchase losses of $1.2 billion on an annualized rate for the rest of 2011. "This is not a bad quarter by any means, but it does beg the question going forward with respect to expenses," said Christopher Whalen of Institutional Risk Analytics. "The efficiency ratio of 63% is up five points from (a year earlier) and is likely to go higher during the balance of 2011. If there is no real growth on the loan line, then JPM must make the number on investment banking and principal transactions." Institutional Risk Analytics downgraded its outlook on JPMorgan to negative, citing concerns about exposures to residential mortgage-backed securities and home equity lines of credit. Write to Kerri Panchuk.

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