Chase Earnings Fall on Subprime Exposure, Home Equity Losses

January 16, 2008 No Comments »

JPMorgan Chase said today that fourth-quarter profit fell 34 percent largely due to subprime exposure and higher delinquencies tied to home equity loans.

Fourth-quarter earnings fell to $2.97 billion, or 86 cents a share, compared to $4.53 billion, or $1.26 a share, in the same period a year ago.

Despite falling short of the analyst-anticipated 93 cents a share, revenue climbed to $17.38 billion from $16.19 billion the year prior, beating analyst expectations of $17.05 billion.

For the entire year, net income rose to a record $15.4 billion, or $4.38 a share, on record revenue of $71.4 billion.

JPMorgan upped its provisions for loan losses by $2.54 billion during the quarter, and wrote down $1.3 billion on subprime positions, including subprime CDO’s.

The company saw an increase of $395 million for losses tied to home equity loans and an $124 million increase for subprime mortgage loan losses.

Home equity net charge-offs were $248 million (1.05% net charge-off rate), compared to $51 million (0.24% net charge-off rate) a year ago.

Subprime mortgage net charge-offs were $71 million (2.08% net charge-off rate), compared to $17 million (0.65% net charge-off rate) a year ago.

Total mortgage loan originations were $40 billion in the fourth quarter, up two percent from the third quarter and 34 percent from the prior year, while total third-party mortgage loans serviced increased 17% from the prior year to $614.7 billion.

In regard to a possible acquisition, Dimon seemed to hint that a purchase could be on the horizon.

“I think in terms of either buying assets or buying companies, we’re very open minded and we figure we can do the right kind of due diligence and understand the values and that we’re giving the value that we’re getting, we would be very happy to do it,” Dimon said during the conference call. “This environment doesn’t change that at all. It just may make it more likely.”

Shares of Chase rose $2.88, or 7.35%, to $42.05 in afternoon trading on Wall Street.

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