JP Morgan Posts Q4 Profit Despite Mortgage Losses
JP Morgan Chase (JPM) posted net income of $3.3bn, or $0.74 per share, to close out the last quarter of 2009. That’s better than the net income of $702m in Q408. For all of 2009, net income was $11.7bn, $2.26 per share, on record annual revenue of $108.6bn and up from net income of $5.6bn in 2008. The bank earned nearly $3.6bn in Q309. JP Morgan said it made approximately 600,000 mortgage modification offers to homeowners and approved 120,000 modifications during 2009. On a conference call this morning regarding the earnings CEO Jamie Dimon remarked that his firms could have modified more distressed mortgages in Q4, but "there's too much paperwork involved in [modifications] so a lot of the reasons we're not getting to final modifications half the time we don't finish the paperwork." The comment set both trader commentary and the blogosphere abuzz. One trader remarked that Dimon always "tells its like it is," while Calculated Risk is commenting that "Dimon apparently isn't aware of any momentum for a macro principal reduction program." Dimon, nonetheless felt the Q4 results still showed improvement in the firm's operations, though "we acknowledge that they fell short of both an adequate return on capital and the firm’s earnings potential,” Dimon said in the quarterly report. “While we are seeing some stability in delinquencies, consumer credit costs remain high, and weak employment and home prices persist. Accordingly, we remain cautious.” The bank wrote off $452m in subprime mortgages, up from $319m in Q408. Prime mortgage charge-offs totaled $568m, up from $195m a year ago. Consumer lending posted a net loss of $1.4bn, worse than the $416m net loss in Q408. Net revenue for this sector was down $1bn to $3.1bn for the quarter, primarily due to decreased mortgage fees and related income and lower loan balances because the bank originated fewer mortgages and a decline in servicing revenue. Average mortgage loans were $136.3bn, down by $13.7bn. Mortgage loan origination totaled $34.8bn, up 24% from the prior year and down 6% from the prior quarter. Total third-party mortgage loans serviced were $1.1trn, a decrease of $90.5bn, or 8%. Average home equity loans were $130bn, down by $12.8bn. Home equity originations were $402m, down 76% from the prior year and 20% from the prior quarter. The mortgage production business had a loss of $192m, compared to positive revenue of $62m a year ago. The bank said an increase in reserves for the repurchase of previously sold loans was partially offset by wider margins on new originations and the absence of markdowns of the mortgage warehouse in the prior year. Mortgage servicing revenue was $564m, up $41m year-over-year, but the mortgage servicing rights (MSR) risk management results were $109m, compared to $1.4bn in Q408. Write to Austin Kilgore.