JPMorgan and Wells earnings fall, shares rise

16 04 2008

JPMorgan and Wells earnings fall, shares rise

Posted by: in Housing

Filed under: Earnings reports, JPMorgan Chase (JPM), Wells Fargo (WFC), Housing, Recession

There’s nothing quite like the earnings game on Wall Street. And two large banks — JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) both played it very well. Despite falling earnings, investors are celebrating. And that’s because JPMorgan and Wells both beat analysts’ expectations.

Bloomberg News reports that Wells earned 11% less than last year — $2 billion, or 60 cents per share — 5.3% more than the 57 cents that analysts had expected. Wells took in $334 million from its stake in Visa Inc. (NYSE: V) IPO, but it also benefited from a tight credit culture and an aggressive sales force. Nevertheless, its charge-offs for bad credit card and car loans were up 26% — a sign of trouble in consumer loan land.

Meanwhile, AP reports that JPMorgan beat analysts’ expectations by 6.3% despite a 50% decline in its net income. Specifically, JPMorgan profit fell in the first quarter to $2.37 billion after it took a provision of $5.1 billion to strengthen its reserves by $2.5 billion and account for $2.6 billion in losses in its loan portfolio. JPMorgan made 68 cents per share compared with $4.79 billion, or $1.34 per share, a year earlier. That was 4 cents more than the 64 cents that analysts expected.

If both banks can continue to make money in this rocky credit market — investors may want to use this as a time to purchase in. JPMorgan is up 4% and Wells rose 6% in early trading.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Wells Fargo stock and has no financial interest in JPMorgan.