This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

JPMorgan CFO Expects Mortgage Production Loss, Higher Legal Expenses in Q3

And while a 200 basis point increase could cause unrealized losses in its bond portfolio to climb by $15 billion, which would affect its capital, it would also generate $17 billion in incremental income over the next three years, the CFO noted.

In short, the capital impact from rising rates is "very manageable" and the incremental earnings impact is "significant," said Lake.

Credit quality continues to improve significantly in the mortgages and credit card businesses. Issuing guidance for the third quarter, the executive said investors can expect the bank to release reserves totaling $1.2 billion in the mortgage business. The Cards business could see an additional $500 million reserve release in the second half of 2013.

But the gains from improving credit quality might be more than offset by an increase in litigation reserves.

The firm has seen a "crescendo of activity" in the last few weeks, with multiple regulatory agencies pursuing legal action against it.

Lake did not offer any fresh details. "We are reacting where it makes sense to do it and where it is in the interest of our shareholders. We are still finalizing the number."

The CFO said the bank intends to be appropriately reserved for all possible legal losses based on the information it has at this time.

The bank is making instituting controls its number one priority and has added 3,000 workers across control functions, according to the presentation.

Guidance for markets revenues was also weak, as a unusually strong September in the previous year, makes for tough comparison.

The bank expects its trading revenues to be flat or lower by 5% in the third quarter.

JPMorgan also set new targets for capital.

While it is on track to finish the year with a Basel III Tier I Common Ratio of 10% by the end of next year, nearly double the level it had when it entered the crisis, the bank plans to maintain an additional buffer of 50 basis points above the minimum capital and supplementary leverage ratio levels.

But, the bank is not giving up on its return targets despite the higher capital, the CFO said.

Overall, it was somewhat of a mixed outlook from the bank. While the long-term outlook was positive, it looks like the third quarter is going to be lackluster.

-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7870 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs