JPMorgan Chase profit soars on market rally 

JPMorgan Chase & Co.'s profit rose more than four-fold to $3.28 billion in the last three months of 2009, but the results released Friday were tempered by rising loan losses at its consumer bank. Its shares fell almost 1 percent in early trading.

The bank had a sobering asessment of the economy, warning that it cannot say it has seen defaults on mortgages and other loans peak. Its earnings came on profits from its investment banking and asset management businesses, which thrived amid the now 10-month-old market rally. JPMorgan Chase earned $702 million a year earlier when the near-collapse of the mortgage banking business forced it to write down the value of billions of dollars in loans.

Over the past year, record-low interest rates have allowed banking companies to profit when lending money at higher rates. And the boom in the financial markets have brought in billions of dollars in trading and underwriting revenue that were decimated a year earlier by the stock market crash.

Investors were disappointed, however, probably because the company didn't raise its 5 cents per share quarterly dividend, as the market had hoped. JPMorgan Chase stock was down 30 cents at $44.39.

When JPMorgan Chase announced third-quarter results in October, bank executives said they would consider raising the dividend when loan losses stabilize and the company's credit costs fall.

Leaving the dividend unchanged may have investors worried the bank is still uncertain about when loan defaults will start to moderate and how big an impact that might have on 2010 earnings.

Mike Cavanagh, JPMorgan Chase's chief financial officer, said during a conference call with the media the bank's outlook on losses from failed loans still hasn't changed, nor has its view of the economy. Cavanagh said the bank is not able to say "we've hit a peak in reserving" funds to cover those losses.

JPMorgan Chase remains cautious about the potential for a second downturn to the overall economy; he said the bank is unsure whether some early signs of stabilization in home-loan delinquencies are just temporary.

Cavanaugh also sid credit card losses were rising, but that had been expected. JPMorgan Chase lost $306 million during the fourth quarter in its credit card services business, and Cavanagh predicted losses will remain elevated in the first half of 2010.

The bank hopes to have a better grasp of losses and the strength of an economic recovery by the middle of the year and would then entertain raising the dividend, Cavanagh said.

The market rally allowed JPMorgan Chase to give big bonuses to its employees for 2009. The company said its total payroll costs, including salaries, bonuses and benefits, rose 18 percent in 2009, although the company cut its work force by 1 percent during the year.

With the rebound in profitability, JPMorgan Chase increased its pay packages for its workers, even as furor over banking bonuses has grown. The average compensation per employee rose to $121,124 in 2009 from $101,110 a year earlier. The average compensation in the investment banking division was about $380,000.

Big banks have faced outrage from politicians who are upset with the lavish pay for companies that helped push the country into recession and received billions in bailout funds. JPMorgan Chase received $25 billion in bailout money in the fall of 2008 at the peak of the credit crisis. It paid back that money in the middle of 2009 when it was first able to do so.

JPMorgan Chase earned 74 cents per share, easily topping analysts expectations of 61 cents, according to Thomson Reuters.

The bank's total revenue fell below expectations, and that may also have troubled investors early Friday. JPMorgan Chase had $25.24 billion in revenue on a managed basis, which excludes certain items such as the effect of packaging and selling pools of credit card debt. Analysts predicted JPMorgan Chase would generate $26.8 billion in revenue.

JPMorgan Chase earned $1.9 billion in its investment banking division, while its asset management division generated $424 million in net income.

Fees from underwriting debt and stock offerings continue to surge in the fourth quarter.

Debt underwriting fees jumped 58 percent to $732 million from the same quarter a year earlier, while stock underwriting fees climbed 66 percent to $549 million.

JPMorgan Chase set aside $7.28 billion for loan losses, essentially the same as it did during the quarter a year earlier, but 10 percent lower than the third quarter.

Nearly all banks have struggled with mounting loan losses as more customers fall behind in repaying loans while unemployment remains high. Unemployment remained at 10 percent in December.

For the full year, JPMorgan Chase earned $11.7 billion, or $2.26 per share on record managed revenue of $108.6 billion. The bank earned $5.6 billion, or $1.35 per share in 2008.

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