JP Morgan Chase (JPM) posted $2.7bn in net income — or $0.28 per share — for Q209, 36% stronger than the $2bn posted in Q109 despite the firm’s $3.5bn provision for credit losses in its consumer lending segment. The company’s earnings-per-share reflected a $1.1bn — or $0.27 per share — reduction due to the repayment of Troubled Asset Relief Program preferred capital. Even after TARP repayment, the firm boasted a 9.7% Tier 1 capital ratio, a 7.7% Tier 1 Common ratio and in all a 5% loan loss coverage ratio at quarter-end. Investment banking, commercial banking, asset management, securities services and retail banking all fared well, posting “solid performance, ” according to the firm, but high levels of credit costs among the consumer lending and card services segments negatively affected overall results. Consumer lending, for example, reported $955m of net losses, compared with $171m in the year-ago quarter and $389m in the previous quarter. Chairman and CEO Jamie Dimon said the firm expects credit costs in this segment “will remain elevated for the foreseeable future.” The firm said $523m in servicing revenue drove the income in the mortgage business as its third-party loans serviced grew by 70% due to the purchase of Washington Mutual banking assets. No-interest expense in the segment totaled $1.5bn, up by $399m or 36% from last year, reflecting higher servicing expense due to increased delinquencies and defaults. The firm’s provision for credit losses was $3.5bn, from $1.5bn last year. Mortgage production revenue was $284m as an increase in reserves for the repurchase of previously-sold loans and markdowns on the mortgage warehouse were offset partially by wider margins on new originations. JP Morgan posted $41.1bn of mortgage originations in Q209, down 27% from last year but up 9% from Q109. But while overall originations — still weaker than last year — showed some recovery from the previous quarter, the firm’s participation in home equity loans is only slowing down 89% from last year and 33% from Q109 to a total $593m in originations for the quarter. Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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