The King Report: Looking at JP Morgan Earnings

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JP Morgan reported better than expected earnings due to fixed income revenue jumping to a record $5B (vs. -$3.6B). Earnings are $3.59B. Once again the usual suspects hailed JPM’s “fortess-like balance sheet”. Few on The Street or in government want to talk about JPM’s humongous, $80 trillion notional value derivative book.

Did any Street analyst ask Jamie Dimon during the conference call: ‘how much of earnings were derived from unrealized gains or marks on JPM’s derivative book?’

JPM CEO Jamie Dimon: Credit costs remain high and are expected to stay elevated for the foreseeable future in the consumer lending and card services loan portfolios.

USA/Today: JPMorgan’s loss provision to cover current and future home loan defaults rose to $3.99 billion, while its provision for credit card losses surged to $4.97 billion.

Credit card defaults and mortgage losses are likely to continue to creep higher and lag an overall economic recovery. Losses on credit cards typically mirror unemployment, which rose to 9.8% in September.

JP Morgan’s losses on credit cards have already passed 10%. The bank said the percentage of credit card loans it wrote off as not being repayable in the third quarter reached 10.3%.
Loan losses were also pushed higher by weakness in the portfolios JPMorgan acquired when it
purchased the failed bank Washington Mutual a year ago.

Easy Al surreptitiously rescued the big banks in the early 90s via the ‘carry trade’. But now, interest rates are too low to provide earnings via a ‘carry trade’. So Benito and his ilk are rescuing the big banks via reflating financial assets and allowing them to manufacture earnings on crappy paper via mark to fantasy.

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