Not impressed with JPM

JPMorgan put out earnings before the open today. It opened up 4% and despite the initial squeeze, it is up about 1% from that point as this statement is being written (9:55). JPM has traded from a low of around 37 to around 47 since November so a two dollar move in this range (after getting beaten down the past week) isn't all that impressive. Even though it is roughly at the average price since November, I still am unimpressed by results that "beat estimates."

Of course Wall Street cares more about coming in line with estimates than actual figures (EPS down 50% yoy, 20% qoq, "could have been worse, buy"). However, if you actually look at the 8-K instead of looking at the headline number, you would notice that JPMorgan made about a billion dollars on the Visa deal. The Corporate/PE division had 1.027 billion in net income which is actually 72 if you subtract out the Visa deal. I don't expect them to make any one-time deals with this much profit over the next year so I would guess that the next earnings will come out much lower than this quarter's. I would expect the remaining quarters to be closer to an average of last year's profit for this division and then a rosy estimate would be that the other divisions keep net income constant (or growing/declining at the rates from Q4 to Q1, effectively flat overall). In this case, Net Income would be 600 million lower (assuming same level of credit losses which I really have no way to estimate, could be lower could be higher and would have a big effect on Net Income) or at 1.8 billion. That would put a crude estimate of EPS for next quarter at .50 or down about 25% qoq (or similarly for this quarter assuming the IBanking revenue was not above average and down 43% qoq from that perspective).

These are crude assumptions, but an exceptional one-time event like the largest IPO in history should not be the saving grace during the credit crunch. I care about earnings going forward.

Note: WFC actually does have a pretty good business model. Over 90% of their loans are prime. They're going to lose some money, but be in a much better position coming out of this crisis. All of their business segments showed declining yoy, but that will likely turn around better than other banks.

JPM is still up .75% from the open (10:20).