Analysts polled by Bloomberg had estimated that the bank would earn 76 cents in EPS on $21.6 billion in revenue. Excluding accounting gains on the widening of its credit spreads, JPMorgan's profit was $1.09, beating estimates; however that number included 42 cents in one-time EPS gains from loan-loss reserve cuts and a Bear Stearns-related gain. Stifel Financial analyst Christopher Mutascio said that excluding one-time items the bank's core EPS performed at a 'run-rate' of $1.35, highlighting JPMorgan's $2.27 billion in mortgage banking earnings as one of the bank's clearest earnings beats. Expenses of $14.97 billion, beat expectations added Mutascio, in a note to clients. While JPMorgan's earnings were boosted by top-line mortgage origination growth, the bank also benefitted from an improvement in the expected loss on its existing loans. JPMorgan's benefitted from a one-time $2.1 billion release of loan loss reserves at its consumer lending operations, which outweighed investment banking unit results that were in-line with expectations. On a call with investors, JPMorgan chief financial officer Douglas Braunstein also said loan loss reserve releases are likely to continue as credit quality in the banks' mortgage lending operations improve. "We continue to be conservatively and appropriately reserved," said Braunstein, who noted that credit card related reserve releases are mostly over.
Those releases of earnings set aside to manage loan defaults may help JPMorgan offset declining interest-rate based earnings. "JPM's loss reserve remains one of the strongest of any major US bank," wrote Miller Tabak analyst Thomas Mitchell, in a Friday note. JPMorgan reported a 4% reduction in its net interest income to $11.15 billion, and a decline in those margins to 2.47%, which wiped out the benefit a modest increase in deposits at the nation's largest bank, according to RW Baird analyst David A. George. Improving credit quality across 'all major loan categories' drove JPMorgan's reserve release, Baird's George added in a note to clients.