For the next couple of days, at least, Jamie Dimon, CEO at JPMorgan Chase (JPM), is the most important figure in the U.S. financial industry.
JPMorgan Chase reports earnings tomorrow, April 14, before the stock market opens. The consensus among Wall Street analysts is looking for earnings of 60 cents a share for the company’s first quarter. That would be a 50% increase from the 40% earned in the first quarter of 2009.
Wall Street, of course, hopes that JPMorgan Chase beats that forecast. Although Wall Street isn’t especially optimistic that will happen. Earnings estimates have been coming down for the stock for the last three months.
But what Wall Street wants, even more than a one-quarter earnings surprise, is to hear CEO Dimon say that the bank has stopped adding to reserves against bad loans. Second best would be a modest add to reserves and a few words predicting an end to a need to add reserves in the next quarter or two.
That’s because any additions to reserves come straight out of a bank’s earnings.
So for example, in the first quarter of 2009 the company’s earnings of $2.1 billion would have been much higher except that JPMorgan Chase had to add $4.2 billion in reserves for bad loans, mostly in its consumer credit card business.
By the fourth quarter additions to credit card reserves were down to $1.9 billion and earnings were up to $3.3 billion.
Whenever JPMorgan Chase stops adding to credit loss reserves, investors can expect to see to big boost to earnings. (Dividend increases wouldn’t be far behind as banks moved to restore some of the dividend payments they cut in the financial crisis.)
And this isn’t true of just JPMorgan Chase. The same is true across the banking sector. The rally in financial shares has been built on the turn in earnings that will come when banks stop needing to throw billions into their credit loss reserves.
What investors with some impatience want to know is when this turn will arrive. As the big bank that escaped the financial crisis with the least damage, JPMorgan Chase is widely expected to be the first bank to report an end to additions to reserves. Other banks can be expected to follow in JPMorgan’s wake with the delay of a quarter or two. But a turn at JPMorgan Chase would mean the turn for the whole sector is at hand.
That’s why every investor who owns bank stocks—and I’ve got two, HSBC (HBC) and US Bancorp (USB), in Jubak’s Picks now—or who is thinking about buying back into the sector wants to hear what Jamie Dimon says tomorrow.
You can sign in for a live Webcast of the JPMorgan Chase conference call at 9 a.m. tomorrow at http://investor.shareholder.com/jpmorganchase/eventdetail.cfm?eventid=79413
Good luck to all those who owns the big C. I wish you all well. But returning to the old glory may be a long shot. The vaccum had been quickly filled, I am afraid. To be fair, Pandit did not start it. (Weill brought in Rubin and Rubin brought in Pandit, sort of, as I read.) Pandit does not appear to have commercial banking experience and he was not even a winner in investment banking world. Taking a loser from Morgan Stanley is a downgrade itself. And we all saw the rest of the story. Nothing remarkable.
Anybody have any news as to why my PBCT has risen 1+1/2 points in past 2 weeks? Am very close to break even right now. Thanks
Speaking of banks, anybody ready yet to consider regional banks? …or is the health of the commercial real estate market still too fragile? A couple weeks ago I opened a half-position in FITB. There seem to be many other decent candidates.
shavdog,
Think like a Citibank executive, my friend!!! If the stock climbs nicely, you’re a genius and deserve a huge bonus! If the stock tanks, have your excuses all ready to go explaining why it is HER fault and her family should provide you with a bailout.
I like C and I strongly believe that Vikram Pandit will return C to its former glory as a banker to the world. Mr Pandit has gone about the business of restoring the bank’s greatness in very methodical and deliberate way.
Will not touch Citi stocks with a 10′ pole until Pandit out of door. Nor other money center banks until real financial reform is done.
Disclosure: I do not own any US banks.
shavdog,
Divorce isn’t necessary, although I hope you have a good sofa to sleep on. 🙂
I had my wife buy a thousand shares of citigroup a few days ago…will I be a hero or headed for divorce court?
The only interest I have in JPM is finding out when the criminal mastermind Jamie Dimon is going to get thrown in jail for leading the largest fraud in the history of the world. I’m talking about the gold/silver manipulation recently exposed by a whistle blower and if you don’t know what I’m referring to, have a read, it’s going to make a great movie plot someday.
http://tinyurl.com/ycdyny8
Buy Silver! Real Silver not SLV.
off topic:
“Indian ion ore FOB prices surge by 35pct in 30 days”
http://steelguru.com/news/raw_material.html
I recently got into BLK after it fell below 200, Im optimistic.