April 15, 2010
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News: JPM and AmEx Celebrate Increased Profits
Recent reports from JPMorgan Chase & Co. (JPM) indicate that Americans are doing a better job at paying credit card payments during the first quarter 2010, contributing to a 55 percent increase in earnings. One of the nation's largest banks and a leading issuer of credit cards, JPM posted a first quarter profit of $3.33 billion, up from $2.14 billion the same time a year ago. Helping to sustain profits were the fixed-income markets, asset management of commercial and retail banking which offset losses in the credit card and consumer loan portfolios. However, credit losses were $7.01 billion, down from $10.06 billion the same time last year and $8.9 billion the previous quarter.
One of JPM's top competitors, American Express Co. (AXP) also reported first quarter results. They too reported a moderate decrease in credit card losses. First quarter defaults decreased to 7.2 percent down from 7.5 percent for fourth quarter 2009. Credit card delinquencies of 30 days decreased to 3.3 percent down from 3.7 percent the previous quarter. Unlike its major competitors, American Express not only loans credit but is also a major card network that processes card payments as well. The company's portfolio consists of more affluent cards where balances must be paid in full as well as a revolving charge card where consumers are allowed to carry a balance forward.
The decrease in credit card delinquencies is important because these delinquencies are an indicator of card defaults in the future. Most banks follow the standard accounting procedure of writing off credit balances that are 90 days or more past due. Writing off card and loan balances does not relieve the consumer of the responsibility of repayment nor does it end the bank's attempt to recover any of the debt. It does, however, allow the company to take the write-off amount as a deduction.