January 14, 2010
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News: JPMorgan Expects to Triple Profits
In spite of one of the worse recessions in decades, high unemployment, and records breaking credit card defaults, someone's earning profits and it isn't the average American. JPMorgan Chase & Co. reported profits for fourth quarter 2009 more than tripled. JPMorgan, the largest U.S. credit card company reported over $2.5 billion in earnings, a whopping increase from the $702 million same time last year. While the company's major competitors reported losses over the past year, Jamie Dimon, JPMorgan's Chief Executive Officer, never posted a loss. Dimon attributed the accomplishment of overcoming mortgage and credit card defaults to the company's success in underwriting stocks and bonds. The company hopes to achieve pre-recession dividends before its competitors.
As analysts expect JPMorgan's three major competitors, Bank of American, Citigroup, and Wells Fargo, to all post losses this week, economic experts say JPMorgan has a stable and solid earning power. Furthermore, the company is strategically positioned to gain a greater share of the credit card and financial market as well as attract prime personnel. The news comes at time when President Barack Obama is expected to ask for a special fee from the nation's top 20 credit card companies and financial institutions to recoup rescue funds and a budget deficit. Dimon spoke out in opposition of the intended fee saying "using tax policy to punish people is a bad idea." Furthermore, Dimon stated that the industry is responsible for absorbing the cost of failed financial institutions.
JPMorgan also expects credit card losses to be lower for the fourth quarter because cardholders have trimmed card spending and reducing balances to escape high interest rates and larger penalties and fees. Additionally, the bank also implemented a special payment holiday in December that will artificially reduce losses. Dimon expects card income for the first half of 2010 to reduce significantly due to new legislation; card sales have already dropped 7 percent from 2008. JPMorgan continues to examine their options in finding a resolution to a decline in mortgage lending and fee income as mortgage applications declined over 10 percent in 2009.