10-QPeriod: Q2 FY2010

JPMORGAN CHASE & CO Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:JPMJPM-PCJPM-PDJPM-PKJPM-PLJPM-PMJPM-PJAMJBVYLD

Summary

JPMorgan Chase & Co. reported strong financial results for the second quarter of 2010, with net income of $4.8 billion, or $1.09 per diluted share, a significant increase from $2.7 billion, or $0.28 per diluted share, in the same period last year. This improvement was primarily driven by a substantially lower provision for credit losses, which decreased by 58% year-over-year to $3.4 billion. Total net revenue for the quarter was $25.1 billion, a slight decrease of 2% from the prior year, impacted by lower trading results and investment banking fees. For the first six months of 2010, net income was $8.1 billion, or $1.83 per diluted share, up from $4.9 billion, or $0.68 per diluted share, in the first half of 2009. The company's capital position remains robust, with a Tier 1 common ratio of 9.6%. Despite some pressures in consumer lending businesses, overall credit trends continued to improve, and the firm demonstrated strong liquidity. The company also noted the enactment of the Dodd-Frank Act, which is expected to introduce significant regulatory changes with uncertain impacts. Investors should note the improvement in profitability driven by reduced credit provisions, alongside a solid capital and liquidity position. While total revenue saw a slight year-over-year dip, the underlying performance of various segments, particularly the recovery in Card Services from a net loss to a net income, and the significant improvement in the provision for credit losses, signal a positive trend. The company also resumed share repurchases in the second quarter.

Financial Highlights

31 data points
Beta

Revenue

$25.10B

Net Income

$4.79B

19.1% Net Margin

EPS (Diluted)

$1.09

Total Assets

$2.01T

Free Cash Flow

$28.33B

Financial Statements
Beta
Revenue$25.10B
Interest Expense$3.03B
Net Income$4.79B
EPS (Basic)$1.10
EPS (Diluted)$1.09
Shares Outstanding (Basic)3.98B
Shares Outstanding (Diluted)4.01B

Key Highlights

  • 1Net income of $4.8 billion for Q2 2010, a significant increase from $2.7 billion in Q2 2009, driven by lower provision for credit losses.
  • 2Diluted EPS of $1.09 for Q2 2010, up from $0.28 in Q2 2009.
  • 3Total net revenue of $25.1 billion for Q2 2010, a 2% decrease from $25.6 billion in Q2 2009, impacted by lower trading and investment banking fees.
  • 4Provision for credit losses decreased by 58% to $3.4 billion in Q2 2010 compared to $8.0 billion in Q2 2009.
  • 5Tier 1 common capital ratio of 9.6% at June 30, 2010, indicating a strong capital position.
  • 6Card Services segment returned to profitability with a net income of $343 million in Q2 2010, compared to a net loss of $672 million in Q2 2009.
  • 7Resumed share repurchases of common stock in Q2 2010, intending to offset share count increases from employee equity awards.

Frequently Asked Questions

The primary driver of the significant increase in net income was the substantial decrease in the provision for credit losses, which fell by 58% year-over-year. This indicates an improvement in credit quality and reduced expected losses across the firm's portfolios.

JPMorgan Chase maintained a strong capital position, with its Tier 1 common capital ratio at 9.6% as of June 30, 2010. This demonstrates the firm's continued ability to meet regulatory capital requirements and support its business activities.

The Card Services segment showed a significant turnaround, moving from a net loss of $672 million in Q2 2009 to a net income of $343 million in Q2 2010. This improvement was driven by a lower provision for credit losses, although net revenue decreased due to lower average loan balances and fee income.

JPMorgan Chase acknowledged the enactment of the Dodd-Frank Act in July 2010, noting that while it includes positive aspects like systemic risk oversight, many challenges and uncertainties remain due to the numerous implementing rules yet to be written. The full impact of the legislation is still unclear and is being closely monitored.