Chase Reports Higher Income, Revenues and Provision for Losses
September 03 2007
By Burney Simpson, insideARM.com
Banking and credit card giant JPMorgan Chase reported increased earnings and revenues for the third quarter but also reported a 67 percent rise in credit losses and a large jump in charge offs.
JPMorgan Chase today reported third quarter net income of $3.4 billion, up from $3.3 billion a year ago. Net managed revenues were $17 billion, up 4 percent from the third quarter of 2006.
Like its major bank competitors, Chase increased its provision for credit losses, raising it to $2.4 billion in the third quarter, up $944 million, or 67 percent from a year ago. Chase reported that its “(c)onsumer managed net charge-offs were $1.7 billion, compared with $1.4 billion, resulting in managed net charge-off rates of 1.96% and 1.69%, respectively.” Chase attributed the increase to losses from home equity loans and higher net charge offs.
The Card Services division reported net income of $786 million, up 11 percent from $711 million a year ago. Net revenues were more than $3.8 billion, up 6 percent from $3.6 billion. Managed receivables at the end of the quarter were $149.1 billion, up 4 percent from a year ago.
Card Services’ managed provision for credit losses was $1.4 billion, up 7 percent from a year ago, due to higher charge offs. The managed net charge off rate was 3.64 percent, up from 3.58 percent. The 30-day delinquency rate was 3.25 percent, up from 3.17 percent. Charge volume increased about 3 percent to $89.8 billion. Merchant processing volume rose 8 percent to $181.4 billion.
The Retail Financial Services unit reported net income of $639 million, down 14 percent from $746 million.
Retail Financial increased its provision for credit losses to $680 million, an rise of nearly 600 percent from $114 million. The provision in the quarter includes $306 million in the allowance for loan losses related to home equity loans. Home equity net charge offs rose to $150 million from $29 million a year ago. Write offs on the subprime mortgage portfolio totaled $40 million, up from $13 million.
The Auto Finance group under Retail Financial reported net income of $76 million, down 11 percent. The provision for loan losses was increased 57 percent to $96 million. The net charge off ratio rose to 0.97 percent from 0.64 percent.
JPMorgan Chase reports assets of $1.5 trillion and operations in more than 50 countries.