JPMorgan has reported its first loss in nine years, because of higher litigation provisions. However, it has set aside sufficient reserves for settlements, and has the second-highest ROE among the Big Four banks
(OPENPRESS) JPMorgan Chase & Co. (JPM) is the biggest bank in the US based on the size of its assets. Headquartered in New York, it was formed after the merger and acquisition of over 1,200 independent institutions. Although the company has done well historically, it is still facing high litigation costs and reported a loss for the first time since 2004.
The company reported a loss of $380 million in its 3QFY13 results, announced on October 11. This translated into a per share loss of $0.17. The bank reported losses primarily because it has allocated $9.2 billion (pretax) for litigation risks. Core earnings per share for the quarter were reported at $1.42 compared to consensus EPS estimate of $1.30, excluding abnormal items.
Consumer and Community Banking revenues were down due to lower net interest margins on deposits and lower mortgage fees and related income. However, net income for the segment saw growth because of lower provisioning for credit losses.
Corporate and Investment Banking revenues declined 2% year-over-year (YoY). But if debit valuation adjustments on structured notes and derivative liabilities are excluded, revenues essentially stayed flat. However, lower non-interest expenses, primarily due to lower compensation expense, more than offset the overall decline in revenues.
Commercial Banking revenues remained flat, but earnings declined 4% due to higher non-interest expenses. Non-interest expenses rose because of an increase in the number of employees bumped up total compensation expenses.
Net revenues from the Asset Management segment increased because of rising interest and non-interest revenues. Non-interest revenues grew as the demand for JPMorgan's asset management portfolio services increased. Revenues from interest rates grew because of higher loan and deposit balances. Even though revenues increased 12%, earnings grew by just 7%. This was because of higher employee compensation expenses due to an increase in the number of employees and performance related bonuses.
Exxon Earnings Beat Street Estimates
Exxon Mobil Corporation (XOM) more than made up for the disappointing results in the previous quarter when it beat estimates and announced $112.4 billion in revenues for 3QFY13. This was a significant turnaround for the company which had recently announced its worst ever results since 2010.
Earnings from its Upstream segment noticeably improved on both a year-over-year (YoY) and quarter-over-quarter (QoQ) basis. The segment performed better because global oil pricing benchmarks like the price of Brent crude oil increased during 3QFY12. Exxon is also increasing its exposure in liquid production to capitalize on high crude oil prices and upstream volumes also increased 1.5% YoY.
The decline in refining and marketing margins is a cause for concern and hit earnings but the possible impact was partially offset by an increase in volumes in 3QFY13. The Dartmouth refinery, which is being converted into a marine terminal, remained functional over the quarter, which also contributed to the higher refining volumes.
Exxon's Chemicals business was the highest growing segment in the previous year. Margins as well as volumes have improved compared to the previous quarter and the previous year's same quarter.
Management also stated that in its earnings call that capex for FY13 was in accordance with guidance. The company's cash balance over the quarter rose by $700 million to $5.7 billion. This indicates Exxon's ability to keep on paying dividends and also continue its share buyback program. Dividend paid out by Exxon this quarter was $2.8 billion and the company also bought back 34 million shares worth $3 billion.