JPMorgan Chase & Co.'s first-quarter profit was not as good as last year's, but it told investors what they wanted to hear: Banking is not dead.
JPMorgan said Thursday it earned $2.14 billion for the January-March period, thanks to both strong trading activity and banking to average consumers.
Like other banks, JPMorgan is still seeing its loan defaults increase. The company's credit costs amounted to $10 billion _ that's $6 billion from loan losses, and $4 billion to build up reserves.
And it anticipates that losses will keep rising in credit cards, home equity loans, mortgages and commercial real estate loans.
But the company is benefiting from growth in deposits, a rise in mortgage refinancing, and low borrowing rates. When a bank can borrow cheaply, it can profit more from lending.
It can also earn more from trading and investing _ like Goldman Sachs Group Inc., JPMorgan pulled in record revenue in the first quarter from buying and selling bonds. The bank said it sold $3 billion worth of 10-year bonds on Thursday at 6.3 percent interest, its first sale in U.S. dollars in the past month without backing from the Federal Deposit Insurance Corp.
JPMorgan had participated in the FDIC's debt guarantee program to raise money for financial institutions, but this time it didn't need government backing. The bank sold bonds worth 2 billion euros at the end of March.
Not only did JPMorgan profit from the wider rate spreads, but it also gained market share from its purchase of Bear Stearns and took advantage of historically high issuance in the bond market.
"January, February and March were some of the biggest bond months ever," said Chief Executive Jamie Dimon in a conference call.
JPMorgan's revenue from the fixed-income markets was a record $4.9 billion, and helped push the entire investment bank division to record revenue of $8.3 billion and a record profit of $1.6 billion.
However, Dimon added that fixed-income activity is likely to taper off _ which means that the investment bank might not be able to pull off another record performance for some time.
"It's not reasonable to expect it to continue at that level," Dimon said.
JPMorgan earned $2.14 billion, or 40 cents per share, on record revenue of $26.9 billion in the first quarter. It earned $2.37 billion, or 67 cents per share, a year earlier.
Analysts predicted a profit of 32 cents per share, according to Thomson Reuters.
The company's shares rose 80 cents, or 2.4 percent, to $33.36 in morning trading.
The results came a week after another big bank, Wells Fargo, surprised investors by announcing a record $3 billion quarterly profit.
Its retail banking unit earned $474 million, compared with last year's loss of $311 million. That business was helped by last year's acquisition of the thrift Washington Mutual Inc. Average total deposits rose 62 percent to $345.8 billion from a year ago, and 2 percent from the fourth quarter of 2008.
The WaMu acquisition also helped drive JPMorgan's commercial banking unit's income up 16 percent to $338 million.
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 is one of several bailout recipients, including Wells Fargo, Morgan Stanley and Goldman Sachs, expressing interest in repaying their government debt soon. JPMorgan got $25 billion from the government late last year to keep the financial system stable and increase lending.
Dimon repeated during a conference call with reporters that he hopes to repay the government as soon as possible, and that he is "waiting for guidance from the government."
He said the bank would be able to do just as much lending without the federal funds.
"Folks, it's become a scarlet letter," Dimon said.
