JP Morgan, Wells Up, WaMu Struggles

JP Morgan and Wells Fargo both posted better-than-expected quarterly earnings even in the face of greater loan-loss provisions and asset writedowns reminding us that not everyone who gorged during the mortgage buffet did so with complete abandon. While I continue to keep a skeptical eye towards all companies (remember Bear Stearn’s aphorism? ‘We have plenty of liquidity’) who were big players in the mortgage game there is definitely room for some winners. I can see Wells coming out of this (assuming they managed their risks appropriately - define ‘appropriately’ in this market?) as a big winner and if they are able to scoop up another Federally-insured buy-out (a la Stearns) they may put themselves in a long-term winning position as others around them fail.

WaMu doesn’t look so good though. As we mentioned months ago, they are the most precariously positioned of the major depositories Market Watch on the latest WaMu, JP Morgan and Wells quarterly reports:

J.P. Morgan rose 2.7% to $43.24 after reporting first-quarter profit $2.4 billion, or 68 cents a share, down from $4.8 billion, or $1.34 a share in the year-ago period. Revenue fell to $17.9 billion from $19.7 billion. Analysts surveyed by FactSet had forecast earnings of 61 cents a share, on average.

Provisions for credit losses were $5.1 billion in the first quarter, up $3.5 billion from the year-ago period, the bank said. The company’s investment banking unit also took mark-downs of $2.6 billion, including valuation hits on leveraged loans and mortgages.

Wells Fargo gained 4.6% to $29.08 after reporting first-quarter net income of $2 billion, or 60 cents a share, beating analyst estimates. The bank said it had record revenue of $10.6 billion, up 12% from the same period last year. It set aside $2 billion in pre-tax provisions to cover credit losses.

Washington Mutual fell 2% to $10.44. The bank reported a $1.14 billion quarterly net loss late Tuesday. The lender said it set aside $3.51 billion of provisions to cover potential loan losses as the economy weakens and home values continue to slide.

Problems in WaMu’s mortgage business are spreading from subprime loans to prime home loans. The level of non-performing prime mortgages exceeded subprime problem loans for the first time during the first quarter, David Hendler, an analyst at CreditSights, noted on Wednesday.

Overall non-performing assets reached 5% of total loans in the period, a lot higher than most traditional banks at this point in the cycle, he added.

This post was found on BlownMortgage
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