JPMorgan Chase reports profit in first quarter

JPMorgan Chase & Co, the second-largest US bank by assets, has reported a profit for the first quarter on the back of record fixed-income trading revenue.

Earnings, however, fell 10 per cent to $2.14 billion, or 40 cents a share, compared with $2.37 billion, or 68 cents, a year earlier, the New York-based bank said in a statement. Per-share profit is expected to be 32 cents.

Like other banks, JPMorgan's loans are still seeing an increase in defaults. Credit costs amounted to $10 billion, JPMorgan said. CEO Jamie Dimon warned that this number could go higher if the recession intensifies, but added that his firm's robust capital levels comforted him. "These levels of capital and reserves, combined with our significant pre-provision earnings power, enable us to withstand an even worse economic scenario than we face today," Dimon said in a statement.

In spite of the credit costs, the company is benefiting from a jump in mortgage refinancing and deposits, as well as low interest rates. When a bank can borrow cheaply, it can profit more from lending and trading. JPMorgan said it extended $150 billion in new credit during the first quarter.

JPMorgan's investment bank pulled in a record profit of $1.6 billion on record revenue of $8.3 billion. A year ago, before JPMorgan bought the nearly collapsed investment bank Bear Stearns, that division had posted a loss. (See: JPMorgan Chase acquires Bear Stearns for $2 per share)

Its retail-banking unit earned $474 million, compared with last year's loss of $311 million. That business was helped by another acquisition - the thrift Washington Mutual Inc, which JPMorgan bought last fall. The WaMu acquisition also helped drive JPMorgan's commercial banking unit's income up 16 per cent to $338 million. (See: Federal Reserve seizes WaMu; auctions it to JPMorgan for $1.9 billion)

JPMorgan's card division, however, did poorly because of surging defaults. It posted a loss of $547 million, compared with a profit of $609 million last year. Asset management, Treasury and securities services, and the corporate lending unit also did worse in the first quarter than in the same period last year.

JPMorgan Chase is among a handful of banks that have hinted at their interest in repaying taxpayer funds, given the increasing restrictions imposed on banks participating in government rescue programmes. Goldman Sachs announced earlier this week that it would sell new stock to help pay back the government. But JPMorgan Chase did not give any further indication in its earnings release about when it might return funds to the US Treasury.

Chase's encouraging results come on the heels of impressive numbers put up in the last week by two of its biggest rivals - Goldman Sachs and Wells Fargo. Goldman Sachs reported a profit of $1.8 billion earlier this week - which topped Wall Street estimates. San Francisco-based Wells Fargo said late last week it expected to book a record profit of $3 billion in the latest quarter, also higher than Wall Street's forecasts.

Following Chase's report, investors' eyes will now turn to two of the nation's most embattled banks - Citigroup and Bank of America. Citi and BoA are slated to report their first quarter numbers on Friday and Monday, respectively.